oakbrook - business review

Vol. 2, No. 1 | April, 2016 ISSN : 2395 - 4647

OAKBROOKB USI NESS R EVI EW

Journal of the New Age Management Thinkers

Table of Contents

Ÿ Editorial 03

Ÿ Papers P Bala Bhaskaran 04

Business Modeling and Strategic Thinking Shradd 12ha Sheth & Pragyashree Dubey Hospitality & Tourism: Growth and Manpower Requirement Palak Sheth, Naresh Patel 22 WORLD CLASS UNIVERSITY: The concept and Its Relevance to Indian Higher Education System

Ÿ Case Rohit Kumar, Swarup Datta & K Rangarajan 32 Patanjali Ayurved - An Unconventional Business Machine C Gopalkrishnan 40 Bhavnagar Vrudhashram Trust Harleen Sahni & Kishor Barad 46 Fast Fashion Gallery - Zara vs H&M

Ÿ Book Review Timeless Leadership: 18 Leadership Lessons from Bhagavad Gita by Debashish Chatterjee 56 Reviewed by Dhriti Bhattacharya Transcendence: My Spiritual Experiences with Pramukh Swamiji by Dr. A P J Abdul Kalam 59 with Arun Tiwari Reviewed by Abhay Raja

OAKBROOK BUSINESS SCHOOLAdalaj, Gandhinagar

Vision:To emerge as the cradle of management thinkers and thought leaders

Mission:To help nurture management thinking and research among the management professionals and academicians

Objectives:Ÿ To offer a platform for research

publications of the emerging management intellectuals

Ÿ To help and nurture research talent among management teachers and professionals

Editorial Board

Ÿ Dr. C Gopal Krishnan, Professor Emeritus, Pandit Deendayal Petroleum University,

Gandhinagar.Ÿ Prof. Chandramouli Pathak, Senior Executive,

International Center for Entrepreneurship & Career Development, Ahmedabad.

Ÿ Dr. Prabir K Bandyopadhyay, Faculty Member, SIBM, Symbiosis International University,

Pune.Ÿ Dr. Muddu Vinay, Director, Presidency College of Management, Bangalore.Ÿ Mr. R Venkatesan, Senior Consultant, National Council of Applied Economic Research

(NCAER), New Delhi.Ÿ Dr. N Rajasekhar, Dy Director,

Manipal University, School of Management, Bangalore.Ÿ Dr. Paresh Karia, CEO, Otis Elevators India Ltd., Ahmedabad.Ÿ Dr. Swarup Dutta, Faculty Member, Indian Institute of Management, Ranchi.Ÿ Dr. Hemant Trivedi, Former Director,

School of Petroleum Management, Pandit Deendayal Petroleum University, Gandhinagar.

Ÿ Prof. S. N. Raina, Faculty Member, Management Development Institute, Gurgaon.

Ÿ Dr. Rajendra Bhatt, Faculty Member,Pharmacology & Management,Gujarat University,Ahmedabad.

Ÿ Ms. Shraddha Sheth, Head-Academics,Oakbrook Business School,Ahmedabad.

Ÿ Dr. P Bala Bhaskaran, Director,Shanti Business School, Ahmedabad.Consulting Editor

EditorialThe business environment in India is in a state of flux. The sub-prime crisis and its after effects on the economy have not yet fully faded. The monsoon in the recent years has not been very helpful either. The forecast of a good monsoon in the coming season is a strong ray of hope in the consolidation of the economy. Fortunes of management education are intricately linked to the prospects of the economy and business; consequently the last decade witnessed great upheavals in the prospect of business schools. Can we look forward to a period of steady growth in the coming years? If the economy looks up the job prospects would go up. But the business schools still would need to re-orient their internal processes to enhance the employability of their students together with their intellectual capabilities. Business schools would need to re-orient their programs to be in tune with the needs of the industry. This is an ongoing process that would need sustenance for a longer period.

In the current issue of OBR we bring three papers, three cases and two book reviews. The first paper looks at the website effectiveness criteria for an industry segment. Website is one of the tools of the digital economy and the paper is expected to set a trend of looking at its effectiveness for each and every industry segment. There is tremendous interest in creating World Class Universities. We have a paper that looks at the characteristics of World Class Universities and what it would mean to India. This issue has three cases; one on Patanjali Ayurved who has given the established FMCG companies a run for their money. A case is on the pioneering work done by an old-age-home; the case points to new dimensions which need to be looked into in the coming days. Another case explore the arena of fast-fashions and the related dynamics. Of the two books reviewed in this issue one is about the age-old wisdom of leadership analyzed in the modern dimensions and the other one is about a scientist's tryst with a spiritual man taking the experience beyond the paradigms of bounded domains.

We do hope you would cherish the offerings of this issue. We promise to make them still sweeter and richer.

Bala [email protected]

Papers

OAKBROOKBUSINESS REVIEW

BUSINESS - MODELING AND STRATEGIC THINKING

P Bala BhaskaranConsulting Editor, OBR

AbstractBusiness Modeling refers to the logic of the rm, the way it operates and how it creates value for its stakeholders. There is no universal consensus on this concept and there is no uniform denition either. The concept is still under evolution; theory-building is in progress. Considerable work has taken place in systems theory and other areas to develop abstract models. This is true in various aspects and parts of management domain also. But there has not evolved a comprehensive template suitable for all business situations. Technological changes create possibilities of new applications and innovations; this would lead to changes in business processes. Technological innovations would to followed by business model innovations to capture value for the stakeholders. In an era where technology and competition are triggering each other for excellence business model innovations will become the order of the day. The study of business modeling and the related analysis will have increasing signicance in the strategic landscape.

Key Words: Business Model; Business model innovation; disruptive technology; disruptive innovation.

IntroductionIt is customary for strategists to refer business model as 'the logic of the firm, the way it operates, and how it creates value for its stakeholders' (Casadesu-Masanell, 2009). This definition is not yet well accepted as a standard definition and there is very little universal consensus of the concept of business modeling. Business modeling is considered as an attempt to map the basics forces and variable at play at a give situation at a given point time. Sometime it is referred to as the architecture of the inputs, variables and forces at work in a given situation or it is referred to as an explanation of the given situation itself. The explanation could be about the strategy adopted by a firm at a given point of time, like the strategy that Jack Welch adopted in the mid-1980s to right-size General Electric. It could be an explanation of the contextual situation of the firm at a given point of time. Business-model of AMUL in the Kheda District of Gujarat vis-à-vis its milk-producers can be an example. This paper is an attempt to explore the various

manifestations of the concept of business modeling and try to establish a position for the concept within the domain of strategy.

Understanding Business ModelsThough the term business-model finds mention with Peter Drucker, as a concept it has not received adequate attention in terms of research and universal definition. It is used frequently to map the dynamic variables and forces at play in a situation. It can be used to explain or illustrate the contextual position of business. It can be used to define the nature of the business at a given point of time; what and how the business is carried out and for what purpose. It is a conceptual model or a schematic or an abstraction of the real situation on the ground. It explains the process of value creation, value capture and value delivery by the firm (Blank, 2013). So far there has not been a scientific, standard definition of business-model; only different definition at different contexts.

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In fact value chain analysis, resourced based theory of the firm, dynamic capabilities, transaction cost economics, strategic networks, five-forces analysis, etc are all models in one sense or another; but none of them represent a comprehensive model of the firm. Boston Consulting Group (BCG) has its own definition of

business-model (Lindgardt, et al, 2009). It defines business-model in terms of two key elements – Value Proposition and Operating Model; each of these two elements are further subdivided into three sub-elements. The concept is described in Fig-1 below.

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The Value Proposi on (What do we offer? To whom?)

1. Target Segments2. Product Offerings3. Revenue Model

Opera ng Model (How do we deliver economically?)

1. Value Chain2. Cost Model3. Organiza on

Business Model

Fig-1: BCG concept of Business Model

While explaining the basic building blocks of strategy, Hambrick and Fredrickson list economic logic as one of the five essential building blocks (Hambrick & Fredrickson, 2001). Since economic logic of a firm is generally explained in its business-model, it is logical to infer that business model can be one of the basic building blocks in the strategic architecture of a firm at any point of time.

How does business-models compare with mind-maps? Mind maps are mostly two-dimensional diagrams prepared by individuals as part of their learning process with respect to a concept; it explains the concepts and helps the individual understand, grasp and explain complex intricacies of the concepts in simpler manner. It maps the variables, elements, factors, underlying forces etc that are pertinent to the concept in a diagram. Since each such mind-maps are prepared by an individual, in a manner that is appropriate to his/her cognitive process, its relevance is personalized. Lending or transmitting the mind-map to others would help in their understanding the concept, but inevitably there is a decline in the cognitive comprehension leading to reduced internalization among the subsequent persons. Mind-maps are generally 2-dimensional (pen and paper); but there is no restriction of it being made in multi-dimensional media. Some have tried to create mind-maps automatically using computers. Mind-maps

are generally individualized tools of learning; when they are modified for use of a larger audience then they could emerge as business models. (Buzan,1974; Nesbit & Adescope 2006)

Literature on economics and business strategy do not seem to have accorded adequate significance to the concept of business modeling (Teece, 2010). One of the reasons could be that most of the concepts in the existing literature evolved over time were dealing with static situations; they were also limiting the number of variables being considered at a time where in reality there were a plethora of variables relevant to the situation. They were explained in terms of diagrams and equations. Even situations that were dynamic were simplified through a set of assumptions that made them appear to be static. Dynamics of the situation was treated only as an extension of the static situations.

Alexander Osterwalder has made significant contributions to field of business modeling. He has tried to develop models for different business situations and has also has evolved a business model template to analyze any business situation. His seminal work, co-authored by 475 practitioners, developed the concept of a business model canvas as a template for generating business model for any business situation. Osterwalder had done his doctoral thesis on business model ontology.


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He had developed in business model design canvas as a systemat ic tool in analyzing and des igning organizations; the tool is based on conceptualizing the business organization in terms of four fundamental

pillars and a host of sub-elements. The primary pillars are [a] Infrastructure, [b] Offerings, [c] Customers and [d] Finances. The template is briefly explained in Fig-2.

Fig-2: Alexander Osterwelder’s Business Model Genera on Template

Forrester's efforts have been to create a comprehensive model of the firm (Forrester, 1961). Forrester in another paper explains the models used by different persons for different purposes and the level of accuracy and reliability of such conceptual models (Forrester, 2009). Each of these attempts has been in different directions, in different perspectives and with different objectives. Forrester's initiatives seems to have enriched systems theory and system dynamics significantly as can be seen in the literature of technology; but researchers in economics and management do not seem to have been influenced as much. With changes in technology and market being more rapid and more disruptive than ever, and with the advances in the domains of statistics, operations research, analytics, computing science etc it is imperative that the complexities in the business context

will be more than matched by sophistication in the decision making process in the emerging scenarios. This would, in all probability, bring focus to business modeling much more than it had been subjected to till now.

McKinsey Model can be seen as a conceptual abstraction of the organizational aspects of a system. It is a generic method of capturing the softer aspects of an organization like strategy, structure, system, staff, skill, style and shared values. It is quite effective in understanding any organization on the above mentioned aspects; it is not a comprehensive model and does not explain financial or marketing aspects of the organization. It can at best be explained as a business model with the limited objective of describing the


organizational aspects of a system.

Salient Features of a Business Modela. Business model is a conceptual abstraction of

the real situation present in the system: Any real system will have a plethora of variables, elements, factors and issues inherent in it at any point of time. When a model is being built to explain or explore certain aspects of the system, it is natural to take into consideration only those variables, elements, factors and issues that are relevant to the context of the problem of analysis. To that extent the model will not be complete or comprehensive vis-à-vis the real situation; the model will only be an abstraction of the reality. This feature of the business model is very similar to the definition of system under General Systems Theory (Laszlo& Krippner, 1998).

b. It captures all the critical elements, variables, factors, issues that are inherent in the functioning of the system. A replication of the reality demands that all variables, elements, factors and issues should be reproduced in identical proportion as in real life. This is almost impossible and a model would have only the significant variables, elements, factors and issues present in it; further there is bound to be a scaling down of the each of them in terms of size and proportion to make the model manageable.

c. It captures the underlying forces and explains the mechanics of operation of the system. A model is meant to explain, illustrate or explore certain mechanics of operation or the inter-relationships among the underlying elements, variables etc. For instance Ansof's Matrix explains the risk of diversification wit h technology and market as t he dimensions. The Five Forces Model explains

the significant forces inherent in a market situation and helps analyze them with respect to any given situation. It captures the overall economic logic of the system.

d. Each business model will have its own objective of explaining or exploring a specific aspect of the system. Each model is created by its creator with specific set of purpose/s. Hence it is not logical to say that each model will have the same objective. The objective of a business model will be contextual.

e. Does a business model capture the overall economic logic of the system? Given the characteristic that each model has its own set of objectives, it would not be proper to say that each business model would capture the economic logic of the system. At best it can be said many business models are described or created to explain the overall economic logic of a system; whereas many business models have other objectives. For instance the McKinsey 7-S model does not capture the economic logic of an organization; this model only captures the organizational aspects of the system. In some segment of the existing literature, business model is referred to as describing the economic logic of the system. This author is of the opinion that it is not proper to define business model as describing only the economic logic of the system. Business model should ideally be defined as a conceptual abstraction of the system while those describing economic logic should be treated as a sub-set of the generic definition.

Type of Business ModelsEach organization came into existence with its own unique bus iness models e i t her d ic ta ted by circumstances or influenced by its founder. Given the variety of situations prevalent in this world we have a variety of business models in existence; each has its own

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raison detaire and logic of existence. Some of them may be replicable while some may not. An attempt has been

made to capture some of the prominent business models and the organizations where they are observed.

Table 3: Types of Business Models

Business Model

Features

Examples

1.Hub and Spoke Model

Central Hub only monitors thro policy guidelines. Divisions are ‘autonomous’ within limits.

·

South West Airlines. ·

Interna onal Hotel chains

2. System and Subsystem Model Main system is sold at low prices;

profits are made through the sale high-priced sub-systems.

·

Printers and cartridges ·

Razors and cartridges

·

Aircra engines and spare-parts · Automobiles and spare-parts

3.Make or Buy Cri cal sub -systems are made by self; non -cri cal subsystems are bought out. Cri cality of sub -systems will change with me. Decisions made a er careful analysis.

· Maru Udyog Ltd when started in the 1980s, most parts were bought out. Gradually capabili es were nurtured in -house and within the country to make some of them.

· Today(2016) when Ford enters India, the local technology is capable of making many parts. So entry and launch can be really fast.

· IKEA, when it enters any new market it comes in with its designs. The parts are made in the host country.

· Now when India has launched its Make -in-India mission and hoping to make many of the armaments in India it is banking on making many parts locally.

·

Up to the 1980s, BSNL used to make its own telephone directories –

at huge organiza onal

and financial costs, in delayed me frame. In late 1980s with professional firms capable of making Yellow pages the scenario changed. BSNL started allowing vendors make Directories and collect he y sum a royal es.


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Source: Developed by the author from various inputs

Business Model InnovationsTechnological innovations are considered the primary innovations in all societies at all times. However many of them did not get commercialized as the innovators somehow, somewhere, failed to monetize them. The ability to monetize the technological innovations or the ability to commercialize them may be called business model innovations. It would be appropriate to state that a technological innovation would succeed only if the business model envisaging the technological innovation has been designed to offer compelling value-proposition to the consumers at acceptable levels of quality and price points. This observation highlights the need to the match business resourcefulness with the technological genius at least in equal terms. Tata Motors achieved a remarkable feat by introducing Tata nano, the world's most economical car at US$2500 in 2009. This achievement was characterized by the technological feat of compacting the technological aspects to come with a small car; but equally important were the business innovations of anchoring on the scale economy of large volumes, inventory management by inviting critical vendors to set up operations adjacent to the mother plant, associating with a leading bank to provide loans to every needy customer so that there was

instant sales and no finished goods piled up etc. Despite all these initiatives the product did not produce the expected outcome. For this the firm had to re-work its business model afresh.

Very often technological innovations and the accompanying business model innovations bring about drastic changes in the structure and processes of the industry itself. Emergence of mobile telephony drastically altered the structure and processes of the telecom industry. Introduction of credit cards and debit cards have drastically altered the payment industry. Introduction of internet technology had the impact of altering the way of doing business in almost all sectors of the economy.All technological innovations do not necessarily imply business model innovations. For instance marginal or gradual and innovations in product characteristics do not alter the paradigms of business drastically. But some innovations like the one experienced in the telecom or credit card industry did alter the paradigms of business and industry drastically. Those technical innovations that warrant and cause comprehensive business model innovations, qualify to be called disruptive innovations.

raison detaire and logic of existence. Some of them may be replicable while some may not. An attempt has been made to capture some of the prominent business models and the organizations where they are observed.

Each technological change is expected to bring in improvements in catering to the customer needs. The transition from horse to stage-coach to railway to automobile to aircraft has brought about newer and better dimensions in the customer needs of transportation. The transition was accompanied by significant capital investment at every stage, primarily due to technological complexities and sophistication. The unit cost to a customer has also undergone a quantum jump initially; but within a given stage, further innovations and scale economies - thanks to business model innovations - had brought about significant reduction in the unit costs. Telecom industry, share-broking industry etc are classic examples to this phenomenon.

Basic changes in technology create opportunities to cater to the customer needs in a better manner; but the onus of taking them to the customer rests with business model innovation. A better understanding of the customer needs, latent desires, capabilities are essential; then bridges have to be built to reach the customer. For a product or service to be marketable it has to be acceptable, affordable, accessible and aware of (Sheth, 2012). Apple's iTunes is an example how the technological opportunity was utilized to make things easy for the customer and make a big business out of it.

There is a strong view that business are models variations on the generic value chain underlying all businesses (Magretta, 2002). This appears to be true to a large extent; but is appropriate to treat business models a lot more than that. From the foregoing business model innovation is about tweaking the value chain in the context of the business environment, technology and the customer to enhance the value proposition on offer. It is possible to argue that business model is the basic building block of dynamic capabilities of a firm (Teece, et al, 1997). Technology and its possibilities are open to every firm; but the firm that is able to perceive, experiment and leverage them ahead of others turns out to be the winner. Technological innovation happens in a sporadic quantum spurt and is followed by small ripples until the next sporadic quantum spurt disrupts the scene. Business model innovation, would logically follow the technological innovations in a somewhat similar pattern.

Teese (Teece, 2010) has summarized the basic issues that mark

the relevance of a business model:

Emergence of Hybrid models of businessAll along businesses used to be classified as for-profit and not-for-profit. Management thinkers after years of experience realized that for-profit organizations with the dominant objective of shareholder-wealth-maximization were incapable of solving the complex social problems of poverty and deprivation prevalent among large number of people. Not-for profit organizations took up the task of addressing such poignant social problems. But these organizations did not possess the capability to address the problems in terms of scope and scale of their operations. Management thinkers soon realized that to address such issues there must exist collaborations between the not-for-profit and the for-profit organizations. It is essentially a marriage between the social-purpose of the former with the business-acumen-call it dynamic capabilities if you may - of the latter (Drayton & Budinich, 2010). Bill Drayton has gone to the extant of conceptualizing every for-profit organization as a social organization and imputing it with a social purpose; such a philosophical twist gives rise to hybrid organizations distinct from for-profit organizations and citizen-sector-organizations (CSO).

Amul business model (very oftern called the Anand Pattern) is designed in a three-tiered organization. The base level of the organization consists of the village level milk cooperatives; the second tier consists of the district milk unions and the apex tier

Table-4: Basic Characteristics of Business Model · How will the product/service be used?

How is it a solution to the customer’s problem?

· How might customers be enticed to ‘pay’ for value delivered?

· How large is the target segment? · Do competitive offerings exist? · Where is the industry in its evolution?

Has the dominant design emerged yet? · How should the product be presented

as a solution to the customer’s problem and not merely a novel item/gizmo?

· What will it cost to deliver value to the customer? Are costs volumes sensitive, and if so how?

· What is the Supplier Specific Customer Value Proposition?

· What is the Related Appropriation Mechanism?

· How can Imitators be held at Bay?


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HOSPITALITY & TOURISM:GROWTH & MANPOWER REQUIREMENT

Shraddha ShethHead-Academics, Oakbrook Business School, Gandhinagar, Gujarat

Pragyashree DubeyManager, Oakbrook International Education & Research Pvt. Ltd., Ahmedabad, Gujarat

AbstractHospitality & Tourism Industry is the most important civil Industry & one of the largest employers in the world. Tourism Industry is linked to the economic environment. There exists a high correlation between growth in GDP growth and growth in tourism sector in India as well as World. It is one of the largest contributor to employment, 1 in 11 jobs is in this sector across world. Total tourist visits in India have increased at an average rate of 14.75 per cent per annum from 577 million tourists in 2008 to 1312.57 million in 2014.In

ndIndia, USD 1 million spending generates 407 jobs in tourism sector. Tourism contributes 22 % to the Gujarat State's GSDP and is 2 largest after Industrial activities. Recently tourism inow in Gujarat has grown tremendously around 13.2%; the major contribution is made by domestic tourist arrivals increased by 23% in 2014-15 from 2013-14. The Hospitality and Tourism units have grown tremendously in in past 5 years and are expected to grow in similar manner till 2025. With the increasing units, the employment proportion is also rising rapidly. The employment growth in Hotels, Restaurants and Tour & Travel units in Gujarat are three times that of national growth.

1.1 Overview of Hospitality & Tourism Sector

Newer destinations of tourism are being opened up continuously and investment into tourism infrastructure has been happening; coupled with the increasing purchasing power of populace the tourism sector has been experiencing continuous growth. This sector has the intrinsic capability of creating jobs and enterprises; this makes it a key driver of socio-economic growth and development. In the post-independent India, with the continuous growth and expansion, the sector of tourism has become one of the fastest growing sectors of the economy.

Hospitality and Tourism sector is broadly classified including following services:

1. Travel Arrangement cater to trip planning,

tour operations and related services like visa, immigration, etc.

2. Transport includes travelling through different modes like Airplane, Train, Cruise and Road.

3. Accommodation includes long-tenure and short-tenure stay at hotel, resort, motel and home-stay.

4. Food & Beverage Services includes restaurants, food joints, bar and local Food Centre.

5. Tourist Services are primarily local market, tourist guides, malls and local transport services.

1.2 Global Hospitality & Tourism SectorIn terms of gross revenue and foreign exchange earnings, hospitality and tourism sector is one among the largest in the service industry. It is also one of the largest employment generators across the world.


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Growth of Tourism IndustryThe tourism's total contribution to worldwide GDP is estimated at 9 % (World Tourism Organization (WTO), 2015). In 2014, estimate showed that the total contribution to GDP was three times the direct contribution. Of the above the direct contribution of tourism to GDP was 31.2%, indirect contribution was 50.7% and induced contribution was 18.1% (World

1Travel & Tourism Council, 2015) .

In 2014, receipts from international visitor spending reached an estimated US$ 1245 billion (euro 937 bn) and total tourism export earnings to US$ 1.5 trillion (euro 1.1 trillion). Tourism exports accounted for 6 percent of the world's exports that year (World Tourism Organization (WTO), 2015).

International tourist arrivals have increased from 25 million globally in 1950, to 527 million in 1995, 809 million in 2005 and 1133 million in 2014. France, the United States, Spain and China continue to top the rankings by both international arrivals and receipts (UNTWO Tourism Highlights 2015 Edition).

Key drivers which impact tourism are new tourist destinations; especially those in the emerging markets have started gaining prominence with traditional markets reaching maturity.

Future Outlook: Hospitality & Tourism IndustryThe global GDP growth rate is expected to remain fairly stable at approximately 3.1 % annually (World Bank, January 2016). Tourism industry contribution to world GDP was USD 7581 bn is expected to grow at an annual rate of 3.8% to USD 11382 bn in 2025 (World Travel & Tourism Council, 2015).

Figure 1 - Contribu on of Tourism to GDP (USD bn)

Figure 3 - Interna onal Tourist Arrivals (Million)

Figure 4 - Projec on of Tourism Growth

Figure 2 - Growth rate of Global GDP andTourism Growth

Source: WTTC Economic Impact 2015 (World)

Source: UNWTO Tourism Highlights, 2015

6485 6567 6846 7083 7316 7581 7864

-3.40%

1.30%

4.30%

3.50%

3.30%

3.60%

3.70%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

0

2000

4000

6000

8000

10000

2009 2010 2011 2012 2013 2014 2015

Contribu on of Travel & Tourism to GDP (USD bn)

Growth

Source: World Bank, WTTC Economic Impact 2015 (World)

-2.1

4.1

2.8

2.4

2.4 2.6

2.4

-3.4

1.3

4.3

3.5

3.3 3.6

3.7

-4

-2

0

2

4

6

2009 2010 2011 2012 2013 2014 2015

World GDP Growth Tourism Growth

674 809

949 1133

0200400600800

10001200

2000 2005 2010 2014


6567 7581 11382

1.3

3.6

3.8

0

1

2

3

4

0

2000

4000

6000

8000

10000

12000

2010 2014 2025

Contribu on to world GDP Growth

1Direct - Spending on accommodation, transportation, attractions and entertainmentIndirect - Travel and tourism supply chain, investment spending and government collective travel and tourism spending Induced - Spending of direct and indirect employees


14 Vol. 2 | No. 1 | April, 2016

International tourist arrivals are set to increase at a growth rate of 3.8 per cent per annum and amount to approximately 1.4 billion by 2020 and 1.8 billion by 2030 implying an increase of 43 million international tourist arrivals each year. In 2030, 57% of international arrivals will be in emerging economy destinations (versus 30% in 1980) and 43% in advanced economy destinations (versus 70% in 1980). It is forecasted that in 2025, nearly 1.796 billion international tourists will arrive. Receipts from international visitor spending are expected to increase by nearly 50% in 2025 to USD 2140 bn (World Tourism Organization (WTO), 2015).

The global hospitality and tourism industry is expected to witness certain key trends:

Ÿ Increased inter region travel and hence increased air travel

Ÿ Arrivals for the purpose of visiting friends and relatives, health, religion etc. are expected to witness faster growth than those for business and professional purposes.

Global demand for manpower in Tourism IndustryIn 2009, Tourism industry overall supported 257.7 million jobs. In 2014 Tourism directly supported 105.4 million jobs (3.6% of total employment). The total

contribution of Tourism to employment, including jobs indirectly supported, was 276.8 million jobs (9.4% of total employment) i.e. 1 in 11 jobs was contributed by Tourism Industry (World Travel & Tourism Council, 2015).

Figure shows the relation between contribution of tourism to world GDP and contribution of tourism to

2employment :

It is expected that Tourism direct support will rise by 2.0% pa to 130,694,000 jobs (3.9% of total employment) in 2025. The total contribution of Tourism to employment is expected to rise by 2.3% pa to 356,911,000 jobs in 2025 (10.7% of total) (World Travel & Tourism Council, 2015).

1.3. Indian Hospitality & Tourism SectorAccording to the World Economic Forum's Tourism

thCompetitiveness Report 2015, India ranks 12 in the thAsia pacific region and 52 globally out of 140

economies ranked on tourism Competitiveness Index. thIt also ranks 13 in Tourism Industry GDP

(https://www.weforum.org).

Growth of Tourism IndustryThe total contribution of Tourism to GDP (including wider effects from investment, the supply chain and

2010 2014 2025F

Contribution to world

GDP(USD billion) 6567 7581 11382

Growth of Tourism

Industry (%) 1.3 3.6 3.8

International Tourist

Arrival (In millions) 949 1133 1796.5

International visitor

spending (USD bn) 1048 1245 2140

Source: UNTWO Tourism Highlights 2015 Edition

Figure 5 - Incremental growth of Tourism in Contribu on to world GDP & Employment (%)


-2.3 -1.3

2.2 2 2.1 2.3 2.6

-3.5

1.3

4.3 3.5 3.3 3.6

3.7

-4

-2

0

2

4

6

2009 2010 2011 2012 2013 2014 2015

Employment impact (%) Tourism Growth (%)

12009-2014 real annual growth adjusted for inflation (%)


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induced income impacts) was USD $ 127.5 bn in 2014 (6.8 % of GDP) and is expected to grow to USD $ 137.1bn (6.8 % of GDP) in 2015 (World Travel & Tourism Council, 2015).

Tourism in India accounts for 6.8 % of the GDP and is the third largest foreign exchange earner for the country. The tourism and hospitality sector's direct contribution to GDP totalled US$ 44.2 billion in 2015 and the direct contribution of travel & tourism to GDP is expected to grow 7.2% per annum (2.5 % of GDP) by 2025 ( www.ibef.org, 2016).

Tourism Industry is l inked to the economic environment. There exists a high correlation between growth in GDP growth and growth in tourism sector.

Total tourist visits have increased at an average rate of 14.75 per cent per annum from 577 million tourists in

2008. The total number of domestic tourist visits in 2014 was 1290 million and foreign tourist visits was 22.57million (Ministry of Tourism, 2014).

Future Outlook: Indian Tourism IndustryThe Gross Domestic Product (GDP) in India was worth USD 2066.90 billion in 2014. It is expected to be USD 3400 billion by 2025 with annual growth rate of 7.8% of GDP.

The total contribution of Tourism to GDP is forecast to rise to USD $ 276.7 bn by 2025 (7.0% of GDP) (World Travel and Tourism Council , 2015). Tourism have attracted capital investment of USD $ 32.42bn in 2014. Tourism is expected to have attracted capital investment at a rate of 6.5% pa over the next ten years to USD $ 66.73 bn in 2025 (Gujarat Tourism, 2015).

Figure 6 - Contribu on of Tourism Sector in IndiaFigure 8 - Tourist Visit in India (Million)

Figure 7 - Growth of Tourism Industry with India’s GDP

Figure 9 - Forecast of India GDP (USD bn)


106.2 111.1 121.2 119.1 122.9 140.5 148.4

-2

4.5

3.9 6.5

5.1 7.3

7.5

-4

-2

0

2

4

6

8

020406080

100120140160

2009 2010 2011 2012 2013 2014 2015

Contribu on of Tourism to GDP (USD bn)

Growth (%)

Source: World Bank, 2016 and WTTC Economic Impact 2015 (India)

4.5 3.9

6.5

5.1 7.3

7.5

10.3

6.6

5.1

6.9 7.3

7.3

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015E

Tourism contribu on to GDP (%) GDP Growth (%)

Source: Indian Tourism Statistics at a Glance 2014

13 19

18.26 19.95

22.57

0

200

400

600

800

1000

1200

1400

2008 2009 2010 2011 2012 2013 2014

Domes c Tourists Foreign Tourists

Source: World Bank, 2016

1365

.37

1708

.5

1835

.8

1831

.8

1861

.8

2066

.9

2182

3400

8.5 10.3

6.6 5.1

6.9 7.3 7.3

7.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0500

1000150020002500300035004000

GDP Annual Growth (USD bn) Growth (%)

669 748 865 1045 1142 1290 14 14

563


16 Vol. 2 | No. 1 | April, 2016

The growth of Tourism Industry is proportional to the growth in number of Hotels, Restaurants and Tour & Travel Units. The hotels and restaurants with increasing in number also focus on their service and facility to maintain their standards.

The rapid increase in tourism is being fuelled by a wide range of contributory factors. Some of the growth drivers are outlined below (IBEF, 2015):

a) Growing Demand• Domestic expenditure on tourism is expected to

rise due to the growing income of households. A number of niche offerings such as medical tourism and ecotourism are expected to create more demand.

b) Policy Support• 100% FDI is allowed in tourism and hospitality,

including the development of hotels and resorts.• Campaigns such as 'Incredible India' and

'AtithiDevoBhava' were launched to harness the tourism industry's potential.

c) Infrastructure• More than half of the Ministry of Tourism's Plan

budget i s channel ized for funding t he development of destinations, circuits, mega projects as well as rural tourism infrastructure projects

d) Raising FDI• Tourism and hospitality had cumulative FDI

inflows of USD8.07 billion in Fy15

National demand for manpower in Tourism IndustryFor every job directly in the Tourism sector, nearly one additional job is created on an indirect or induced basis, making its linkages stronger than in both the agriculture and education sectors. For every $1 million spending in different sectors, following number of jobs are created (WTTC India Benchmarking Report, 2015):

Currently Tourism, being employment intensive, provides employment to approximately 37 million (both direct & indirect) people throughout the country and is one of the largest employers in the country.

The total contribution of Travel & Tourism to employment was 36,695,500 jobs in 2014 (8.7% of total employment). By 2025, Tourism is forecast to support 45,566,000 job (9.0% of total employment), an increase of 2.0% pa over the period (WTTC, 2015). The trend of growth in tourism employment with its contribution to GDP is shown below:

Figure 10 - Employment genera on per $USD1 million spending

Figure 10 - Employment genera on per $USD1 million spending

Source: WTTC India Benchmarking Report, 2015

1054

813

407 381 329 315 231

0

200

400

600

800

1000

1200

Source: WTTC Economic Impact 2015 (India)

-2

4.5 3.9

6.5

5.1

7.3 7.5 7.3

-5

-3.5

1.5 0.7

1.2 2.5

1.9 2.2

-5.6

-2.1

2.7

1.2

1.4

2.7

1.8 2

-8

-6

-4

-2

0

2

4

6

8

10

2009 2010 2011 2012 2013 2014 2015E 2025F

Tourism Growth (%) Direct Employment Impact (%) Total Employment Impact (%)


17Vol. 2 | No. 1 | April, 2016

The direct and total employment proportion seems to move in similar fashion from 2011 to 2025. The same trend has been observed in the employment of major four segments in Hospitality and Tourism Sector i.e. Hotel, Restaurant, Tour & Travel Units and Medical wellness (MoT & Market Pulse, 2012).

1.4 Gujarat Hospitality & Tourism SectorGujarat is the 6th largest state in India, located in the western part of India with a coastline of 1600 km (longest in India). It is perhaps the only sector which has a very elaborate and multiple backward and forward linkages with other segments of the economy like infrastructure, transport, construction, environment, water resources, etc. The below table reinforce the immense potential of tourism as a noteworthy contributor to Gross Domestic Product (GDP) and employment.

Growth of Tourism IndustryIn 2014, the total contribution of Tourism Industry to Gujarat's GDP is 2.7 %. The total investment in Gujarat towards Tourism Development is USD 0.81 bn (Gujarat Tourism, 2015).

The share of trade, hotel and restaurants business in the service sector's GSDP has grown significantly from around 37.7% in FY05 to 43.7% in FY13. Economic growth of the state, robust infrastructure and brand campaigning have benefited tourism, hotel and trade business. Further owing to tourism policy, Tourism incentive package scheme and destination and heritage specific development plans, tourism and trade business

is expanding in the state (D&B, 2015).

ndTourism contributes 22 % to the State GSDP which is 2 largest after Industrial activities. Tourist inflow was 32.6 million during the year 2014-15 which was 13.56% higher than that of the previous year and was 91.65 % higher than 17.01 million in 2008-09 (GITCO, 2015). Out of total number of tourists, foreign tourist arrivals increased by only 7 per cent which is even lower than national average. However domestic tourist arrivals increased by 23 per cent in 2014-15 from 2013-14 (Times of India, 2015).

Figure 12 - Analysis of Manpower growth inHospitality & Tourism Sector in India

Figure 13 - Distribu on of GSDP among keyEconomic Ac vi es (2014-15)

Figure 14 - Tourist arrival in Gujarat (In millions)

Source: Analysis derived from WTTC Economic Impact 2015 (India) and Report on Study toAssess the Requirement of Manpower in Hospitality and Travel Trade Sector

0

20000

40000

60000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Direct Contribu on to EmploymentTotal Contribu on to EmploymentEmployment in Hotel, Restaurant, Tour Units & Medical Wellness

Source: D&B India 2020 Economy Outlook

Agriculture & Allied

Ac vi es

11%

Industry39%

Transport, store & Comm.

9%

Banking & Insurance

7%

Public Administra

on

4%

Trade, hotel &

restaurants 22%

Real estate & other services

5%

Other

services4%

Source: Manpower and skill assessment for tourism sector in Gujarat GITCO Report 2015

12.3414.12 15.8

17.01 19.81

22.36 25.4

28.79

32.6

0

5

10

15

20

25

30

35


18 Vol. 2 | No. 1 | April, 2016

The increasing tourist inflow can be attributed to growing prominence of the State as a major business hub and it being one of the choicest destinations for foreign direct investment in India. Robust Infrastructure, a very high rate of urbanization and supportive policies for tourism promotion has been the other contributors.

The overall year on year growth rate of total tourist arrivals in Gujarat has been higher than that of India as a whole, indicating a better performance by the state on the tourism map. A high percentage of tourist arrivals from within the State indicate a stable growth of tourism in future. This can be attributed to growing awareness of the state's tourism assets and a booming economy.

As the GDP Contribution increases annually same number of the Hotel and Restaurants is also increases to meet the demand accordingly. The hotels and restaurants with increasing in number also focus on their service and facility to maintain their standards.

The hotels sector comprises various forms of accommodation, namely star category hotels, heritage category hotels, timeshare resorts, apartment hotels, guest houses, and bed and breakfast establishments. In India hotels are classified into six categories: Five star deluxe, Five star, Four star, Three star, Two star, One star. Mott Macdonald Report mentions that there were 24286 hotel rooms in Gujarat in 2002 (Mott Macdonald , 2003). According to TOI Report, there are total 64,000 rooms in the state in 2012 as compared to 48,000 in 2010. Considering the inflow of tourists, total number of hotel rooms in the state is expected to go up to 1 lakh by 2017 (India Hospitality Review, 2012).

From the above data, the tentative number of hotel rooms in the state was calculated on the basis of CAGR method. Graph of tentative number of Hotel Rooms is shown below:

A Report on Restaurant Industry in India says that there were 27704 Restaurants in Gujarat in the year 2004 (FH&RA, 2005). Another report of IIM 2011 mentions that restaurants have grown at the rate of 9.8 % annually till 2010 (IIM, 2011). It is assumed that the growth rate is constant till 2025.

Figure 15 - Total no. of Hotel Rooms in Gujarat

Figure 16 - Total no. of Restaurants in Gujarat

Source: Mott Macdonald Report, 2003 & India Hospitality Review, 2012

4408

1

4800

0

5542

6

6400

0

7004

9

7667

0

2070

55

0

50000

100000

150000

200000

250000

2009 2010 2011 2012 2013 2014 2025F

Source: FH&RA Report, 2005 and IIM Report 2011

4421

3

4854

6

5330

4

5852

7

6426

3

7056

1

1973

28

0

50000

100000

150000

200000

250000

2009 2010 2011 2012 2013 2014 2025F


19Vol. 2 | No. 1 | April, 2016

At present, the total number of tour and travel operator is around 200. Last year, there were around 150 tour and travel operators. It is assumed that the growth rate is constant till 2025.

The calculations of Hotel Rooms, Restaurants and Tour and Travel Operator are enclosed in Annexure I.

Future Outlook: Tourism Industry As per Tourism Policy 2015-2020, the total contribution of tourism industry to Gujarat GDP will be 5% by 2025 and total investment for tourism development will be USD 4 bn in 2025.

Key drivers which impact tourism are Economic growth of the state, robust infrastructure and brand campaigning and trade business. Further owing to tourism policy, Tourism incentive package scheme and destination and heritage specific development plans, tourism and trade business is expanding in the state

(D&B, 2015).

State demand for manpower in Tourism IndustryAs per increasing importance of Gujarat state in terms of investment destination, entering into new era of immense employment generation, particularly in the tourism sector. Tourism is an income multiplier. Since tourism is a multidimensional activity, it would be worth to say that it has enormous capacity to rectify the unemployment problems in the state. The employment can be created with relatively low investment in fixed assets per employee. Major areas where the employment benefits can be hunted out are in the hotels, resorts and other recreational areas (Ansari, 2013).

Tourism, being a service industry, it has a significant effect on those areas which has surplus labour, because for this sector the skilled & efficient human are extremely important. This is almost 10 years on, there is only marginal increase in employment generation is seen. Most of the employment in Gujarat tourism industry is indirect and no achievement made till now in terms of direct employment.

As the State is growing rapidly in tourism sector, there is good chance for the development of employment generation opportunity. As per the New Tourism Policy 2015, employment of 0.95 million was created in 2014 and it is projected to create 3 million by 2025. State thus offers a high scope for profuse employment generation & related activities in the form of accommodation projects, food oriented projects, amusement parks and water sports, etc.

Figure 17 - Total no. of Tour & Travel Opera onin Gujarat (Govt. of Gujarat, 2015)

Source: Gujarat Tourism Website

36 47 63 84 113 150

3552

0

500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012 2013 2014 2025F


20 Vol. 2 | No. 1 | April, 2016

AnalysisWTTC Report of India Economic Impact shows the current and future scenario of tourism contribution to employment. Ministry of Tourism report brief trend from 2009 to 2017 and forecasted to 2022. It is assumed that the trend will continue the same till 2025.

Ÿ Demand for Hospitality and Tourism qualified manpower is ~12.18% in 2011 increased to ~13.88% by 2015 and will reach to ~22.47% by 2025.

Ÿ The manpower requirement is growing at rate of ~5.31% to 8.05% from 2015 to 2025 and it will reach around 10.24 million in 2025.

Table 1 - Current & Projected Manpower requirement in Hospitality & Tourism Industry in India (’000)

Table 2 - Current & Projected Manpower requirement in Hospitality & Tourism Industry in Gujarat (’000)

Sr. No. Particulars 2011 2012 2013 2014 2015 2025F

1. Direct Contribution to Employment 22046 22203 22471 23024 23455 290202. Total Contribution to Employment

(World Travel and Tourism Council , 2015)

34854 35255 35736 36695 37365 45566

3. Demand for Hospitality & Tourism qualied Manpower (MoT & Market Pulse, 2012)

4244.1 4455.5 4682.1 4925.4 5187 10240

(i) Hotels 2091.3 2237.4 2393.7 2560.9 2739.7 6183.7(ii) Restaurants 1955.2 1999.3 2044.3 2090.4 2197.4 2672.7(iii) Travel & Tour Units 99.7 101.5 103.3 105.1 107 127.8(iv) Medical Wellness 97.8 117.4 140.9 169 202.8 1256

4. Employment of Qualied Manpower (3/2)

12.18% 12.64% 13.10% 13.42% 13.88% 22.47%

5. Average Annual growth in manpower requirement

{[(Xi

–

Xi-1)/ Xi-1] of sr.

no. 3} 4.98% 5.09% 5.20% 5.31% 8.05%

Source: WTTC India Report, MoT Report and CAGR Method

Sr. No. Particulars

2011

2012 2013 2014 2015

2025F

1.Total Contribution to Employment(Gujarat Tourism Policy (2015-2020)) 694

771

856 950 1055

3000

2.Employment of Qualied Manpower (Refer Table - 2) 12.18% 12.64% 13.10% 13.42% 13.88% 22.47%

3. Demand for Hospitality & Tourism qualied Manpower 85 97 112 128 146 674

(i) Hotels 23 26 30 33 35 115(ii) Restaurants 56 64 74 87 102 526(iii) Travel & Tour Units 6 7 8 8 9 34

4.Average Annual growth in manpower requirement

{[(Xi

–

Xi-1)/ Xi-1] of sr. no. 3}

15%

15% 14% 15% 18%

Source: Table 2, Tourism Policy for the state of Gujarat (2015 2020) and Oakbrook Analysis


21Vol. 2 | No. 1 | April, 2016

Bibliography

(WTO), W. T. (1999). Tourism 2020 Vision South Asia Vol 6.

www.ibef.org. (2016). Retrieved 05 13, 2016, from www.ibef.org.

Ansari, S. &. (2013). Role of Tourism Industry in Employment Generation in Gujara. Gujarat: International Journal of Research in Humanities, Arts and Literature ( IJRHAL).

D&B. (2015). D&B India 2020 Economy Outlook. Gujarat: D&B.

FH&RA. (2005). Restaurants Industry in India trends and Opportunity, 2005. FH&RA.

GITCO. (2015). Tourism Report.

Gujarat Tourism. (2015). Gujarat Tourism Policy (2015-2020). Gandhinagar.

http://reports.weforum.org/travel-and-tourism-competitiveness-report-2015/economies/#indexId=TTCI&economy=IND. (n.d.). Retrieved 05 13, 2016, from http://reports.weforum.org.http://www.tradingeconomics.com/india/gdp-growth. (n.d.). Retrieved 05 13, 2016, from http://www.tradingeconomics.com.

IBEF. (2015). IBEF Tourism and Hospitality Report August 2015.

IIM. (2011). Economic Growth in Gujarat in Relation to the Nation and Other States in Recent Times - A Statistical Analysis, IIM, 2011. Gujarat.

India Hospitality Review. (2012). http://www.indiahospitalityreview.com/news/hoteloccupancyrategujaratfalls15cent201112. Retrieved 05 15, 2016

Ministry of Tourism. (2014). India Tourism Statistics at a Glance 2014. New Delhi.

MoT & Market Pulse. (2012). Report on Study to Assess the Requirement of Manpower in Hospitality and Travel Trade Sector. MoT.

Mott Macdonald . (2003). Report on 20 Year Perspective Plan for Development of Sustainable Tourism in Gujarat. Ministry of Tourism.

NSDC. (2015). NSDC Report on Human Resource and Skill Requirement in the Tourism, Travel, Hospitality & Trade Sector (2022).

Times of India. (2015). http://timesofindia.indiatimes.com/city/ahmedabad/Gujarats-tourist-inflow-up-by-13-5-in-2014-15/articleshow/47396255.cms. Retrieved 05 15, 2016, from http://timesofindia.indiatimes.com.

Vibrant Gujarat. (2015). Sector Profile Tourism Industry. Gujarat: Govt. of Gujarat.

World Bank. (January 2016). Global Economic Prospects - Spillovers amid weak growth.

World Tourism Organization (WTO). (2015). UNTWO Tourism Highlights 2015 Edition.

World Travel & Tourism Council. (2015). Travel & Tourism Economic Impact 2015 (World). London, UK.

World Travel & Tourism Council. (2015). WTTC Travel & Tourism Economic Impact 2015 (India).

WTTC. (2015). WTTC India Benchmarking Report.

Ÿ Out of total requirement in hospitality and tourism sector of 3 million, the demand for hospitality and tourism qualified manpower will be around 0.67 million in 2025.

Ÿ As compared to Indian statistics, the manpower requirement growth rate of Gujarat is very high ~15% to 18% from 2015 to 2025.

Ÿ Hence it can be concluded that there is huge manpower demand in Gujarat in Hospitality & Tourism Industry.


WORLD CLASS UNIVERSITY:THE CONCEPT AND ITS RELEVANCE TO HIGHER EDUCATION SYSTEM

Palak ShethDirector, Planning & Development, Pandit Deendayal Petroleum University, Gandhinagar

Naresh PatelHead of Management Department, Dharamsinh Desai University, Nadiad

AbstractOpening up of economies across the world, evolution of knowledge as a competitive asset in place of capital and the quest to enhance competitive advantage in every sector of the society have signicantly enhanced the perception of the relevance of educational institutions in the development of mankind. The earlier institutions that contributed signicantly to human society came to be looked upon as the role models. This perhaps triggered the concept of world-class universities. While every society and every nation desired to create such world-class universities, there was no consensus on the concept of or what constituted 'world-class university' even among experts. This paper is an exploration into this concept; in the absence of well-established denitions the paper looks at the features of those universities that have been signicant in their contributions to the societies around them so that an inventory of features can be created few of which could be construed to constitute a world-class university. Later the paper explores the status of these features in the current context of Indian higher education.

Key Words: World-class universities, Higher Education, Talent Pool, Research-led Institutions, Ranking of Universities.

IntroductionLiberalization, opening up of the economy and the consequent competition have brought about changes in thinking on practically every aspect of life. Educational sector is no exception to this phenomenon, with increasing realization that the economic future of nations largely depends upon quality of their education.

Competition at world level, development of knowledge economy, and the push to achieve competitive advantage very different from traditional competitive advantage with the advent of knowledge economy, all have accelerated thinking on the need to build world class universities so as to train students to meet problems of

the present day and the future. In the changed circumstances, Knowledge has replaced Capital, as the competitive asset that is primarily responsible for building competitiveness of organizations as well as for nations. (Jamil Salmi, 2009; Altbach, 2010; Qi Wang, et al., 2012; Mok & Hallinger, 2013) With this realization, countries all over the world have been placing greater emphasis on educational reforms and building institutions of world-class. Says Mok and Hallinger, “Changes in the global economy observed over the past several decades have made it increasingly clear that the quality of higher education represents a cornerstone in any strategy for national development.” (Mok & Hallinger, 2013; Bajunid, 2011; Carnoy, 2003; Gopinathan & Lee, 2011). The Times Higher Education observed,

22 Vol. 2 | No. 1 | April, 2016


“The quest to create 'world class' universities has become something of a global obsession in the past decade as governments across the world have put the development of competitive higher education and research systems at the heart of their national economic strategies.” (THES Global Ltd, 2015)

Alumni from the some of the best institutions in India – like the IITs and the IIMs – find easy entry into the prime institutions of the world as well as into the leading MNCs, but very few institutions from India find a place in the ranking of the top institutions of the world. The paper is an attempt to investigate this phenomenon and measure the distance that Indian elite institutions have to travel to reach the list of top one hundred.

Meaning of World-Class UniversityThe Concept and Empirical EvidenceThe concept of world-class university is still under evolution. Jun Li, the noted academician from Hong Kong University says “ambiguous, uncertain, and contested varying from one context to the other” (Jun Li, 2012). There is no single definition on the concept of world-class University; says Prof Nian Cai Liu, director of the Center for World-Class Universities at Shanghai Jiao Tong University. “I don't think there will be one 10 years from now as well; This definition too liberal and too general; every country, every interested university must find its own way to define what is real excellence.” (University World News, 22 November 2013). Professor Philip Altbach, director of the Center for International Higher Education at Boston College, said “Every country wants a world-class university. No country feels it can do without one. The problem is that no one knows what a world-class university is, and no one has figured out how to get one. Everyone, however, refers to the concept.” (Philip Altbach, 2004). Asian countries have started realizing the need to create institutions of excellence and many have embarked on the road to create world-class universities though they may not be clear about the goals and targets (K. H. Mok and Anthony B.L. Cheung, 2011; Also see: Altbach & Balan, 2007). In the absence of a clear definition, the concept has

to rely more on perception rather than any set of absolute criteria. Today one has to rely on some of the well accepted global rankings to assess the position of university among the global leaders. This is precisely stated by Jamil Salmi, “Rather than self-declaration, the elite status of world-class university relies on international recognition” (Salmi, 2011)

An alternate approach will be to look at the concept being contextual to the specifics of a region or a country. This view has been enunciated by Marginson, “there is no universal model for development of World Class universities; they differ from country to country because of difference on macro aspects” (Marginson, 2012).

Features of a World-Class UniversityGiven the absence of a well-established definition, how does one list the features of a word-class university? An approach would be to list the distinguishing features of a cluster of leading world-class universities and create an inventory of features. If a university possesses many of those in the inventory, it could qualify as a world-class university. Jamil Salmi, former coordinator of the World Bank's tertiary education program and author of the book as, The Challenge of Establishing World Class Universities, (Salmi, 2009) has carried out such an exercise and has identified the following as the basic features of world-class universities.

Ÿ Highly qualified faculty; Ÿ Excellence in research; Ÿ Quality teaching; Ÿ High levels of government and nongovernment

sources of funding; Ÿ International and highly talented students; Ÿ Academic freedom; Ÿ Well -defined autonomous gover nance

structures; andŸ Well-equipped facilities for teaching, research,

administration, and (often) student life(Salmi, 2009; Altbach 2004; Khoon et al. 2005; Niland 2000 &2007)

23Vol. 2 | No. 1 | April, 2016


Alden and Lin in their research have identified a comprehensive list of key characteristics of world-class universities. A collaborative research by English and Chinese universities has identified additional key attributes ranging from international reputation of the university to the university's contribution to society. Although these attributes are significant and critical in assessing the reputation of a university, the process of measuring these attributes is yet to be evolved (Alden & Lin, 2004). Given this context Jamil Salmi, in the interest of operational manageability, had proposed “superior results of the World Class Institutions (highly sought graduates, leading-edge research, technology transfer etc) can essentially be attributed to three complementary sets of factors at play:

Ÿ A high concentration of talent (faculty and students)

Ÿ Abundant resources to offer a rich learningŸ Favorable governance features that encourage

strategic vision, innovation, and flexibility.”

Concentration of High TalentAccording to Salmi, one of the distinguishing aspects of a world-class university is its ability to attract top-class students, faculty, and researchers. In fact, these universities are in a position to select top students from a large pool of very bright and academically qualified candidates internationally because of their special standing and reputation. He cited that the percentage of students at Harvard University was 19; Stanford at 21 and Columbia at 23. Over 30 % of the academic staff in top US and UK universities were from outside the country. He believed that 'knowledge-networking capacity of a university' was maximum when it had significant talent (students, teachers and researchers) was from across the globe. Wherever free mixing of talent was not feasible due to regulatory restrictions, Wherever free mixing of talent was not feasible due to regulatory restrictions, Salmi argued, 'knowledge-networking capacity' was bound to be deficient. Internationalization needs curriculum reforms, student and faculty mobility, international cooperation,

productive partnership with prestigious universities, e t c . m u c h b e y o n d m e r e m e m o r a n d u m o f u n d e r s t a n d i n g . M a r g i n s o n a r g u e s t h a t internationalization strategies should include strong emphasis on global publishing, cross-national benchmarking, student-exchange and openness to f o r e i g n s t u d e n t s . ( M a r g i n s o n , 2 0 1 2 ) .

Abundant ResourcesWorld-class universities are characterized by abundant resources at their disposal through large endowment funds and significant research income (Salmi & Saroyan 2007). Abundant financial resources enable institutions to attract and retain leading scholars and to build facilities. Abundant resources would trigger virtuous circle that enables institutions to attract still higher talent as has been seen in the US.

Studies have shown that best-quality research happens where the research talent is rewarded well (Aghion et al, 2007; Salmi, 2006).A world-class university must truly be a magnet to attract talent from all over the world. Among the world-class universities are of two broad models: The European model envisages almost identical funding support to all the universities so that all of them have identical resources and status. The American model is quite different where funding emanate from state as well as private resources. In practice the American model has been found to be more effective since the elements of enterprise and competition come into play leading to a higher level of competitive spirit among the universities. Today the world is inclined more towards the American model (THES Global Ltd., 2015).

Favorable GovernanceThe third important feature among world-class institutions, according to Salmi, is governance in universities that “enables institutions to make decisions and to manage resources, without being encumbered by bureaucracy.” (Salmi, Op.cit .) The governance dimension basically concerns with “regulatory framework, the competitive environment, and the degree of academic and managerial autonomy that

24 Vol. 2 | No. 1 | April, 2016


universities enjoy.” Governance would include matters such as “autonomy, leadership, regulatory frameworks, strategic visions, competitive environments and organizational cultures” (Qi Wang et al ). The Economist (2005) referred to the Higher education system in the United States as “the best in the world” and attributed this success not only to its wealth (financial and intellectual) but also to its relative independence from the state, the competitive spirit that encompasses. et al. (2008) had also found on the Based on the study of European Universities, Aghion concluded that “research performance was positively linked to the degree of autonomy.” (Quoted in Salmi, p.28)

Macro AspectsResearch studies have established that on public spending as well as performance- ranking are highly correlated (Aghion et al. 2008). It has shown that level of expenditures is one of the key determinants of performance. Total spending on tertiary education (public and private) represents 3.3 percent of GDP in the United States while it is only 1.3 percent in the EU (25 countries). Per student spending is about US$54,000 in the United States, compared with US$13,500 in the European Union. Similarly, there are large spending variations among European universities that are correlated with the rankings results of the respective countries. The United Kingdom and Switzerland have relatively well-funded universities and achieve the highest country scores in terms of rankings, while universities from the Southern European countries, including France and Germany, have lower ranking scores associated with low levels of funding.(Aghion et al. 2007)

Existence of world-class universities is found to depend on the ability of the country to spend on R & D which in turn depends on the level of economic development (Marginson, 2012). In 2009, Korea spent 3.4% of its GDP on R&D, Japan, 3.3%, Taiwan, 2.9% and Singapore, 2.4%. Mainland China, where R&D spend was at 1.7% of GDP, has plans to spend 2.5 % by 2020. At this level Chinese R&D spend would match the US R&D spend in

quantitative terms. Marginson observed that there were few world-class universities in countries with per capita income of less than US$15,000 per year, with China being the major exception. This also meant that poorer countries lacked the capability to engage foreign educated scholars in their universities thereby crippling their ability to create world-class universities.

The key empirical findings, according to Times Higher Education (2014), of the top 200 universities are:

Ÿ Has an annual income of $751,139 per academicŸ Has a student to staff ratio of 11.7:1Ÿ Hires 20 per cent of its staff from abroadŸ Has a total research income of $229,109 per

academicŸ Publishes 43 per cent of all its research papers

with at least one international co-authorŸ Has a student body made up of 19 per cent

international students

The Role of LeadershipAnother critical input-feature for world-class universities, according to literature, is presence of “Inspiring and persistent leadership, a strong strategic vision, a philosophy of success, and a culture of constant reflection, organizational learning, and change”. (Salmi, 2009)

In conclusion it can be said that creation of world-class university calls for creation internal and external conditions that are complementary to each other in a symbiotic way. This calls for astute strategy and leadership. (Rouse & Garcia, 2004)

Building World-Class Universities:The International ExperienceIf we track the history of the concept of world-class university, we would find USA in the lead. It was in USA that the concept of modern research university emerged through a marriage of the Anglo-Saxon Oxbridge College with the German University system. The

25Vol. 2 | No. 1 | April, 2016


American Universities have produced a large number of products of modern day use; today American research university is “gold-standard and competition among nations to create world-class universities as good as America's is intensifying……… OECD has raised spending on higher education from 1.3 per cent in 2000 to 1.6 per cent in 2011……………What happened in America then happened in Europe and Japan in the 1960s and 1970s, in South Korea in the 1980s and is now happening the world over.” (Economist, 2015).

In Russia, President Vladimir Putin has set a mandate five Russian Universities into top one hundred of the Times Higher Education World University Rankings by 2020. In Japan, President Shinzo Abe has set a target of Ten Japanese Universities among the world's top 100. Such targets are being set by other countries too. (THES Global Ltd, 2015; Altbach & Balán, 2007; Qi Wang, et al., 2012; K.H. Mok and P. Hallinger, 2013). In response to Shanghai rankings, China has launched project in 1998 called project 985 to improve the quality of education. Germany launched its Exzellzinitiative in 2005, France announced a program to create a “Sorbonne league”, Russia started a project called 5-100 (to get 5 institutions to the top 100), and Japan a program called “Super Global Universities Program. (The Economist, March 28, 2015) We will review the strategies followed by some of our neighbors.

Malaysia in 2004 set targets for its higher education to reach university league tables: “to have at least three universities in the top 100 and at least one in the top 50 by the year 2020.” Their strategy included:

Ÿ Recruit more international students Ÿ Aggressively promote the country as an

education hub.Ÿ Increase in research and developmentŸ International collaboration network, andŸ High-impact publications.

(New Straits Times, 2012 quoted in Mok & Hallinger, 2013)

Singapore wanted to make itself a hub for higher education; to achieve this objective Singapore started inviting world-class universities to set up Centers of Excellence at Singapore. Leading Universities that have established centers at Singapore include INSEAD (Institut Européen d'Administration des Affaires), University of Chicago Graduate School of Business, University of Pennsylvania's Wharton School, Massachusetts Institute of Technology, Technische Universiteit Eindhoven, Technische University Munchen, Georgia Institute of Technology and Johns Hopkins University. Singapore has also been taking the route of educational collaboration with highly reputed universities in the West with the idea of offering dual degrees. (Ng & Tan, 2010).

In Hong Kong, on the other hand, the emphasis was more on research, though Hong Kong has been promoted as a regional hub for education. Hong Kong's strategy included:

Ÿ Emphasis on research performance, which has been reflected in the research-led funding formula adopted by the government (See: Mok & Cheung, 2011)

Ÿ Identifying specific strengths and developing centers of research excellence

Ÿ Research assessment exercises modeled on the UK approach to monitoring research performance

Ÿ Differentiate in terms of role and mission Ÿ Pressures from the government to engage in

international researchŸ Provide high quality teaching, and Ÿ Contribute to professional and community

servicesŸ Increas ing t he admiss ions quota for

government-funded places for non-local students,

Ÿ Support measures such as hostelŸ Provision and scholarships, employment-

related initiatives for non-local students, andŸ Relaxation of immigration control so as to

retain non-local students to stay and work in

26 Vol. 2 | No. 1 | April, 2016


Ÿ Relaxation of immigration control so as to retain non-local students to stay and work in Hong Kong.

China’s project 211 has been seen as an attempt to develop 100 key universities through supplementary funding and the '985 scheme' aims to transform China's elite universities to join the club of world's super elites. The strategy included:

Ÿ Government directed changesŸ Resources provided by the governmentŸ Inviting Chinese scholars working in Western

University back to work in China

Japan initiated 'Flagship Universities Project' aimed at developing a few major Japanese universities into world-class universities through funding. Strategy of Taiwan envisaged setting targets and subsequently improving infrastructure for research. (Mok & Hallinger, 2013)

Ranking CriteriaRankings of Universities published yearly are good indicators of (1 ) standing of t he univers i ty internationally, and (2) what makes them to be top class or world-class university. A careful study of the process of ranking will throw light on the critical factors that help constitute a world-class university.

Other Ranking exercises too follow similar metrics and methodology. The proportion of students a university turns away during student acquisition is considered a good indicator by many. This metric indicates the extent to which

a university can be choosy; it also points towards academic reputation. (The Economist, “Rankings: Top of the Class, “(Special Report), March 28, 2015).

Table-2: Costs and Benefits of Strategic Approaches

Condi ons Strategic approaches

Upgrading Exis ng Ins tu ons

Merging Exis ng Ins tu ons

Crea ng New Ins tu ons

Ability to a ract talent

Difficult to renew staff and change the brand to a ract top students

Opportunity to change the leadership and to a ract new staff; exis ng staff may resist.

Opportunity to select the best (staff and students); difficul es in admi ng top student to rela vely less known ins tu ons; need to build up research and teaching tradi ons.

Costs

Less Expensive

Neutral

More expensive

Governance

Difficult to change mode of opera on within the same regulatory framework

More likely to work with legal status different from that of exis ng ins tu ons.

Opportunity to create appropriate regulatory and incen ves framework.

Ins tu onal Culture

Difficult to transform from within

May be difficult to create a new iden ty out of dis nct ins tu onal cultures

Opportuni es to create a culture of excellence.

Change Management

Major consulta on and communica on campaign with all stake-holders

‘Norma ve’ approach to educate all stakeholders about expected norms and ins tu onal culture.

‘Environmentally adap ve’ approach to communicate and socially market the new ins tu on.

27Vol. 2 | No. 1 | April, 2016


Generic Strategies for building World-Class UniversitiesThe Strategic Options:The strategies available to the emerging economies in taking their university education system to the world class are one of the following:

Ÿ Identify and upgrade a select/small number of existing universities towards world-class universities (Transform Approach).

Ÿ Create a set of world-class universities from scratch (Clean Slate Approach).

Ÿ Encourage a number of existing institutions to merge and transform into a new world-class university. (Hybrid approach)

The costs as well as benefits of each of the above strategies are given in the following table-2.

Different countries have been following different paths; each has its own merits and suitability given the existing environment in the country.

World-Class Universities: The Indian ContextIndia's higher-education system has been described as “a sea of mediocrity in which islands of excellence can be found” (Altbach, 2004). In a seminal research on the deterioration of academic standards among the Indian universities, Raj Kumar (Raj Kumar, 2014) has explored the causes for the institutionalization of mediocrity as below:

Ÿ Lack of talent (inspiring teachers and rigorous researchers)

Ÿ Absence of vision and visionary leaders to

build institutions around societal needs. Ÿ Poor infrastructure at university campusesŸ Lack of motivation among faculty to performŸ Inability to create an environment conducive

to research and publicationsŸ Absence of interdisciplinary programs Ÿ Lack of innovation in curriculum and course

designŸ Inadequate compensation for faculty Ÿ Poor faculty development initiativesŸ Poor governance structure Ÿ Poor system of monitoring and evaluation

(resulting in serious instances of malpractices)

In the new millennia India has seen the launch of a number of private universities. These private universities have not changed the overall mediocre performance of the Indian university system. In fact they have only inherited the practices and patterns without much of change. A colloquium held at IIM Ahmedabad, had identified the root causes of the current scenario of Indian university system to be connected with Academic leadership, academic environment and infrastructure, governance mechanisms, funding related issues, and structural aspects (IIM Ahmedabad, 2007).

The author has attempted to benchmark the status of the Indian university system vis-à-vis the various critical parameters which are found to be representative of the world-class institutions elsewhere in the world. The results are tabulated below n Table-3. To conclude, elite educational institutions in India too need to improve on a number of points to reach world class university status.

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A rac ng Talent: Tea chersA racts the best staff & retains

them

World-class DepartmentsDo not have a number of world-

Class departments

Educa onal Environment

Provides a high quality and suppor ve research and educa onal environment

Building Research Strengths

Do not have a dis nc ve reputa on and focus for research in “lead” subjects

Visionary Leaders

Has first -class management team

with strategic vision and implementa on plans

Innova ve Ideas

Do not generate large number of innova ve ideas

Do not produce basic and applied research in abundance

Output Produces graduates who end up in posi ons of

influence and/or power (In a limited way)

Ground Breaking Research Do not produce ground breaking research

output recognized by peers and prizes (Nobel Prize Winners)

Se ng own Agenda Has confidence to set own agenda (within the

regula on)

Interna onal Students Cannot recruit staff and students from

interna onal market (regulatory issues) Do not a ract a high propor on of students from overseas (regulatory issues)

Interna onal Market Limited opera ons in the interna onal market and interna onal ac vi es (research links, student exchanges, and throughput of visitors of interna onal standing)

FinancesDo not have abundant very sound financial base

Do not have diversified sources of income (Limited sources)

History of Superior PerformanceDo not have a history of superior achievement (young ins tu ons)

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Contribu ons to SocietyLimited Contribu ons

Benchmarking

Limited bench marking with top universi es and departments Worldwide

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31Vol. 2 | No. 1 | April, 2016


PATANJALI AYURVED-AN UNCONVENTIONAL BUSINESS MACHINE

Rohit KumarIndian Institute of Management, Ranchi

Swarup DattaIndian Institute of Management, Ranchi

K. RangarajanIndian Institute of Foreign Trade, Kolkata

“Big companies in their boardrooms are now discussing on Patanjali and they are chalking out strategy about how to fight with us,” Baba Ramdev quoted in an

1interview .

At a time when most fast-moving consumer goods (FMCG) companies are still sceptical about a pick-up in consumption resulting improvement in revenues and profitability, Baba Ramdev-promoted Patanjali Ayurved is eyeing more than150% growth in FY16, according to a

2recent Edelweiss Research report . Coming out of nowhere, Patanjali Ayurved is now India's fastest growing consumer product brand. Established domestic and global competitors are unnerved by the rocketing sales of its wide range of staples, nutrition, cosmetics and personal care products. The products of Patanjali, are so popular that analysts are saying that it is 20 billion-rupee ($307 million) revenues during the year 2015 could pose a threat to established age-old Indian consumer brands such as Dabur, Emami and Marico. Unlike its rivals, Patanjali Ayurved has not yet spent a dime on marketing or advertising, and its products currently sell on word-

3of-mouth .

During the month of April 2015 Kishore Biyani, India's own Sam Walton, got a phone call from Baba Ramdev, the co-founder of Patanjali Ayurved. What they talked

about can be gauged from the fact that Biyani made two trips to the Patanjali food park near Haridwar in Uttarakhand in the weeks that followed. The astute Marwari was bowled over by what he saw – neat and modern production lines packaging a wide range of FMCGs. He tasted some of the foodstuff produced there and instantly liked it. The affair culminated in a deal during early October 2015 under which Biyani will retail Patanjali's 500 or so products: biscuits, juices, honey, supplements, toiletries and instant noodles which are sold through Patanjali's stores and some multi-brand grocery stores; now they will be available in Biyani's Big Bazaar supermarket chains. The deal could be a force multiplier for Patanjali from Rs 2020 croes in 2014-15, it hopes to log a turnover of Rs 5,000 crore during 2015-16. During the year 2014-15, the company made a profit of

4Rs 316 crores .

“There is a great demand for their interesting range of products,” said Biyani whose group is targeting 10 billion rupees in sales from Patanjali products during the current year (2015). To compare Biyani's group sells 13 billion rupees worth of Unilever products annually. “I Believe Patanjali products during the current year will hit 50 billion rupees in revenues this year, double it next year and in the next two-three years, become a Top Three Indian consumer products brand,” said Biyani.

Case

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In the absence of Nestle's Maggi Noodles in the Indian market, Patanjali took the advantage and launched its own Atta noodles, saying it would also get into health drinks for children with brand called Powervita, which could compete with the likes of MNC products Bournvita, Complan and Horlicks. This would be backed by packaged foods such as pasta, oats,

5cornflakes, all domain of foreign companies .

The Journey from Yoga to Ayurveda to FMCG ProductsAs per the company's website , Patanjali Ayurved Limited (PAL) is much more than a company. It is CONCEPT – a concept that links the rising destiny of millins of rural masses on the one hand and many more suffering the onslaught of the unhealthy urban lifestyle on the other. It is all about economically processing farm products into daily use consumables ranging from Ayurvedic health supplements to Foods and cosmetics and then supplying them largely to the urban world.

During an interview with a journalist, Acharya Balkrishna, the Managing Director of PAL, recalled how Patanjali diversified from yoga and ayurveda into juices,

6when farmers of amla (goose-berry in English)spoke to Ramdev and him about the inadequate market for their produce. “Swamiji (Ramdev) then said that we could make amla juice, a form in which amla was traditionally never consumed.” Baba Ramdev believed that he could make the product popular through his yoga classes, especially when his followers trusted his word. The company's first products were Aloe Vera Oil and Amla Juice. There was no market for products like these. Nobody ever thought that these would sell.

Patanjali Family includes - Patanjali Ayurved Limited ( a for-profit-entity incorporated as a company), Patanjali Yogpeeth ( a not-for-profit-entity registered as a Trust) and Patanjali Foodpark ( a Special Purpose Vehicle – Mega Food Park). See Table-1 for details.

Patanjali AyurvedThe man behind the company's meteoric rise is Baba Ramdev, who left his home at the age of nine to study Sanskrit and yoga. He partered with 'Acharya' Balkrishna in the 1990s to manufacture medicines. The brand name Patanjali Ayurved combines the name of India's ancient herbal medicinal system of Ayurveda , and the famed yoga saint of yore, Patanjali. The

enterprise was started as a small pharmacy by Baba Ramdev and his collaborator, Ayurveda expert Acharya Balkrishna, in 1997.Patanjali Ayurveed was incorporated as a private limited company in 2006. According to documents available with Care Ratings dated May 2015 the company has three manufacturing units located at Haridwar, Uttarakhand; retail of the produce is done through Patanjali Arogya Kendra, Patanjali Chikitsalaya,

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Table-3: The Group’s Strategic Priorities · To establish state-of-art modern food,

juice and herbs processing plant with latest technology at Padarth, Haridwar, in the foot-hills of Uttarkhand.

· Identify areas, villages, farmers, cooperatives, self-help-groups (SHG) and clusters for growing crops of desired standards, for both quality and quantity.

· To provide necessary technology and know-how to the farmers of the catchment areas of Uttarkhand and Uttar Pradesh, for growing organic crops and other premium plantations.

· Liasoning with Central and State financial corporations, banks and other sources to finance the registered farmers enter into forward marketing contracts with registered farmers.

· Collecting farm produce through mobile collection centres and primary collection centres. Safe and quick transportation of the produce from the collection centres to the main processing centres, with a view to produce wastage of perishables.

· Ensuring direct and decent remunerations to the farmers. Low cost processing of farm produce. High volumes will ensure economies of scale.

· Supply of quality products through a wide network of Patanjali sale centres throughout the country. Opening many more such agro-based processing centres in the rest of the country.

Source: Company website. Link: http://patanjaliayurved.org/pal/?page_id=15# accessed on 1March 2015.


Swadeshi Kendra and more than 17,000 retail outlets 7spread across the country .

According to the report, 92 percent stake in Patanjali Ayrved limited (PAL) is held by Acharya Balkrishna, while a Scotland-based non-resident Indian couple, Sarwan and Sunita Podar, hold the remaining 8 percent. Baba Ramdev has no stake in the company, according to this report. Despite having no stake in the company Baba Ramdev is available whenever it him – for marketing its products, featuring in ad campaigns, or even in negotiating deals. His style is personal, conversational. While Balkrishna says he is the Managing Director of the company, the company website says he is the Chairman. That aside, Balkrishna, along with Ram Bharat, Ramdev's brother, manages the affairs of the FMCG enterprise.

The current structure of the company has Balkrishna at the helm, Swami Muktanand and harat as board representatives, a vertical head each for food, toiletries, and ayurveda followed by vice-presidents for different functions such as exports, marketing and R&D. Deepak Singhal is the chief strategy officer of the company. He is a graduate of the Kurukshetra University and with over 10 years of professional experience. He joined Patanjali when he was 34 years old. The company has about 200 employees in the cadre of general manager and above. As a whole the company has staff strength of about 10,000, including contractual workers. Largely, employees are hired through job portals and references. The company also has plans to hire MBAs from premier institutes of the country. Patanjali Yogpeeth

Patanjali Yogpeeth(Trust), founded in f bruary 2005 at Haridwar in Uttarkhand, is one of thelarget yoga institutes in the country. It is also the flagship project of Ramdev, whose name is inevitably prefixed by baba, the

9term assumed by sanyasins (ascetics) . The Yogpeeth is named after saint Maharishi Patanjali who is known for his treatise on Ashtang Yoga (Yoga with eight limbs of stages). Patanjali Yogpeeth appears from behind a massive gateway. The exteriors of the buildings are in

34 Vol. 2 | No. 1 | April, 2016

Table-4: Product Category and Price Comparison Product Category

Patanjali Rival-1 Rival-2

Tooth-paste

Patanjali Dant Kanti (Rs 25)

Colgate Active Salt (Rs 48)

Dabur Red Paste (Rs 47)

Mixed fruit Jam (500 gm pack)

Patanjali (Rs 75)

Kissan (Rs 105)

Tops (Rs 95)

Liquid Detergent (500 gm/ml pack)

Patanjali Somya (Rs80)

Ezee (Rs 90)

Genteel (Rs99)

Source: Business today Dec 6,2015


soothing pastel tones, with abundant greenery and bougainvillea flowers adding just the right amount of brightness. There is not a spot of garbage in sight and security guards all over make sure it stays that way.It houses a hospital, pharmacy and several Patanjali trusts. Patanjali Yogpeeth carry out work in the field of medical science, research in Yoga and Aurveda as well as medicinal plants and herbs. It is a multi service unit, spanning in about 20 acres land and housing Patanjali Ayurved Chikitsalaya, Panchkarma & Shatkarma Clinics, Research Centres, Ayurvedic Surgery Research centre, Diagnostic research Centres (Pathology, X-Ray, ECG) etc. Simultaneously, qualitative research activities are one of its unique features to define Yoga nad Ayurveda on the parameters of modern medical

10sciences .

An important wing of the Patanjali Group , the Patanjali Yogpeeth, has seen surge in donations in the last few years. The donations to the trust has increased to Rs 87.89 crores in FY14 (provisional data), against Rs 64.92 crores in FY13 and Rs 44.86crores in FY12, according to data from Brickwork ratings dated July 2014. The net profit of the group in FY15 was Rs 316 crores compared to Rs 186 crores in FY14. The growth in net profits was 71 % in FY15 vis-à-vis 103% in FY14. Such remarkable performance had made the group comparable to FMCG leaders like Emami and Marico. Emami had recorded net profits of Rs 486 crores in FY15 (growth of 21% over FY14) while Marico had recorded net profits of Rs 574 crores (growth of 18% over FY14). These performance figures have made the group talk of the town and a

11competitor to be watched carefully .

Patanjali FoodparkPatanjali Food-park was established in 2009 as a special purpose vehicle (SPV) for setting up a mega food-park in Haridwar under the mega food park scheme of Ministry of Food Processing Industries , Government of India. The food park makes available services for establishing backward and forward linkages covering the entire food processing value chain. Patanjali Ayurved hold 49 %in the SPV while the balance is owned by other companies

who are not part of the Patanjali Group, according to 12data from Brickwork Ratings, April 2014 .

Product Categories and Price ComparisonPatanjali Ayurved Ltd produces quality herbo-mineral preparations. To monitor quality, Divya Yog Mandir Trust and Patanjali Yogpeeth grow many endangered herbs on its farmland. The principles of Good manufacturing Practices (GMP) are rigorously followed in the plant and the company prides itself on being

13environment friendly . The product categories include food, healthcare, toiletries, dental products, hair-care and cosmetics. For details on revenues through these product categories and the distribution channel see Exhibit-1.

Pricing strategy of PAL is to price its products substantially lower than those of its competitors. “Product development at Patanjali works on three basic principles,” says Balkrishna, “They are: competitive pricing,

14purity of raw materials used and innovation. ” Table-4 provides details on product category and price comparison.

35Vol. 2 | No. 1 | April, 2016


According to Edelweiss Research, Patanjali Ayurved that operates in three broad segments – foods(food supplements, digestives, dairy, juices etc.), FMCG (cosmentics – shampoo, soaps, face-wash; home care – detergent cakes, powder, liquid etc; ) and ayurvedic products ( healthcare products for blood pressure, skin diseases, joint-pains etc). The company clocked a turnover of Rs 2030 crores in FY15 with EBITDA (earnings before interest, taxation, depreciation and amortization) of around 20 %. “Growth is being driven by the company's largest selling product, cow's ghee (expected to be Rs 1200 crores in FY16) followed by Dant Kanti and Kesh Kanti. PAL also has a robust pipeline of new products. Over FY12-15, Patanjali registered revenue CAGR (compounded annual Growth Rate) of 64.7 %. In FY15, of the total sales of Rs 2030 crores, food and cosmetics contributed Rs 800 crores each while healthcare products comprised the balance. Besides Patanjali Noodles, the new launches pipeline includes Dant Kanti Advance, Sugar free Chyavanprash, PowerVita, Seabuck thorn dietary supplement and powdered hair dye,” says the Edelweiss report.

“We are giving a tough fight to foreign companies in each and every segment – be it medicines, herbal cosmetics or foods,” says Ramdev adding that all the products are 10 - 40 % cheaper than MNC brands in the market. For instance, if Kellog's is selling flakes for Rs 91 and Rs 159 (MRP for 250 gm and 475 gm respectively), Patanjali flakes are available for Rs 85 for 250 gm and for Rs 145 for 500 gm. The aggression on the price front is

15also visible in categories like detergents (vis-à-vis Vim) .

Building a trusted ayurveda brandPatanjali broke into Trust Research Advisory (TRA's) Annual Brand Report for the first time in 2015, featuring among the seven most trusted Ayurveda brands in the country. TRA Chief Executive N Chandramouli says this is partly because of Ramdev's own celebrity status in business and political circuits. Ramdev took the responsibility of popularizing yoga , while Balkrishna focused on the product-side. “Ramdev was also the only spiritual leader to figure in our top 21 personalities list, at number 16 this year. This is the first time four years since we launched the report that a spiritual leader has featured in our

personality list, otherwise dominated by Bollywood and cricket players,” says Chandramouli.

Spurred by the popularity of brand Ramdev, Patanjali Ayurved has come up one of the fastest growing FMCG companies in India. Between FY13 and FY 14, the company's net profit grew by 103 %. “The game changer was when the Aastha channel (spiritual TV) started featuring Ramdev's yoga in the morning slot in 2003, which attracted huge following,” adds the report.some experts conceded that Patanjali has created reasonable brand equity, which would have been impossible with loose quality controls. The brands Patanjali Ayurved sells via its 15,000 exclusive outlets across the country and some one-lakh stores that stock its products are evidence enough of Ramdev's obsession with swadeshi.

Swadeshi connecting with masses17The word 'swadeshi ' means ethnic and implies self-

sufficiency. “We want to create a situation in which multinationals are unable to sell anything in India despite their best efforts to do so. We are hoping to give them a headache,” Baba Ramdev said at a conference to announce the deal with Biyani”. It was Biyani's swadeshi roots that led Baba Ramdev to tie-up with the man often called India's retail king. Biyani is the CEO of the Future group. Not having a business plan does not mean that the duo lack ambition. “In five years, I will the swadeshi products of Patanjali to such great heights that foreign companies will dwarf in front of them,” declares Ramdev. This does not appear to be an empty threat. Patanjali will focus on six big product portfolios to drive its growth: a breakfast range including cornflakes, 'healthy' noodles, ghee, Kesh Kanti (hair-care products), Dant Kanti (oral-care products), which is already a Rs 250 crores range ,

1 8and Chyavanprash . See Table-5 for Acharya Balkrishna's responses to questions on competition and human resources.

Product Quality, Innovation and PricingThe product plans are based on identifying products that Patanjali can produce economically. The research faculty has more than 500 scientists who support in

36 Vol. 2 | No. 1 | April, 2016

Table-5: The Management’s take on Human Resources and Competition Questions Response from Acharya Balkrishna What do you look for in a job candidate before you hire them?

Our system is corporate, but our culture isn't. We hire people that share our line of thought. Incidentally they're also experts in their fields. We don't hire those who have non-vegetarian fare, consumer tobacco or alcohol. They must be patriotic and spiritual. We routinely receive resumes for consideration. We scan them and choose the best in case of vacancies. We look at a relationship that can survive the test of time. They work here to serve society, not just to earn money. I personally never charge a rupee as a salary.

It's been in the news that you're looking to hire executives from top FMCGs.

If there are people in the system willing to come to our side, it's adifferent thing. However, we never target specific brands. We haven't come this far by copying the financial system or policies of any company, and we won't. We don't consider these companies as competition.

Why don't you market your products?

For any FMCG product you'll have raw material, processing cost and packaging. Nobody gives out of their own pocket. Either one has to increase the price or offer inferior quality. If we invest in marketing we can't offer low prices. MNCs might try to sell products via marketing, we'll do the same with quality.

Source: http://www.businessinsider.in/Exclusive-the-accidentalbusiness-Patanjali-Ayurved/articleshow/49337393.cms accessed on 1st March 2015.


product development initiatives. The food park is spread over 150 acres and located 25 kms from Patanjali yogpeeth. Nearly 6,000 liters of amla juice is produced every hour. For such large output, the food park has warehouse that spans 100,000 square feet and can store up to 11,500 tons of goods. This is also a zero-waste plant. There is a dedicated bioresearch institute at Patanjali that works towards how organic waste can be used as fuel, fertilizer and fodder for cattle. The production lines ae automated and comparable to the best in the country.

The company's key strength, apart from its superior product quality, Edelweiss says, lies in pricing. The company's products are priced around 15 % to 30 % lower to competition, which makes it an attractive proposition for consumers. Moreover, it is able to offer such discounts primarily because of having negligible advertising and promotional (A&P) spend versus its competitors that have A&P spends ranging from 12-18% as a percentage of sales. Experts believe that this has been possible through its strong sourcing back-end. Explaining the 15 % profit margin, Balkrishna says it is because Patanjali's administrative costs is only up to 2.5 % of revenue as against 10 to 15 percent in larger companies. “Our top management does not take any money and this helps us scale up our operations while keeping costs low” says he.

In one of the interviews with media personnel, Acharya Balkrishna has told that the company has never done any market research or market survey; they had focused all their efforts on R&D, product development and quality control. The company never think of commercial benefits; it is guided by consumer demand. The company and its key personnel immerse themselves with the people and consumers, understand their sentiments, needs and desires. For instance the company started selling Aloe Vera Oil at Rs 200 when most MNCs priced their product at around Rs 1300. The company's focus was never on the size of the market, but on the

19demands of the people .

Threats perceived by Competitors and Beyond, FMCGLarge FMCG companies, notably multinationals are worried at Patanjali's rise. Privately, they fear that with a friendly regime at the Centre, it could infringe upon their intellectual property. Also, a friendly government could help Patanjali make inroads into the large institutional markets like the armed forces canteen

37Vol. 2 | No. 1 | April, 2016

Product Revenue Share (%)

Growth Rate (%) overprevious year

Food 36.78 99.57 Healthcare 19.13 30.58 Toiletries 14.56 53.77 Dental Products 10.93 45.86 Hair Care 10.78 51.35 Cosmetics 7.38 40.7

Exhibit - 1. Revenues from different categories of products in 2014-15.

Source: Business Today December 6, 2015, Pg. 84


38 Vol. 2 | No. 1 | April, 2016


Exhibit - 2: Patanjali Ayurved: Distribu on Network

Source: Business Today December 6, 2015, Pg. 86

72 SuperDistributors

Retailers More than 300,000

Patanjali Chikitsalaya [Dispensary with cer fied

Doctors] 1,500 nos

Patanjali Arogya Kendra [ No Doctor present]

3,500 nos

Distributors 2,000 nos

Dr. Rohit kumar is an Assistant Professor at Indian Institute of Management, Ranchi. He received his Ph.D. in Strategic Management from Indian Institute of Foreign Trade, New Delhi.

Dr. Swarup Datta is an Assistant Prof. at IIM Ranchi. His research interests are in the area of Corporate Renewal and Revitalization.

Prof. K. Rangarajan is Head, IIFT - Kolkata Centre and also, Head - Centre for MSME Studies at IIFT. He is an Accredited Management Teacher and is a member of several professional bodies.

Disclaimer: The case has been written to facilitate class-room discussion; it is not intended to illustrate either effective or ineffective handling of an administrative situation.

Publica on Details

Title : OAKBROOK BUSINESS REVIEWLanguage : EnglishPeriodicity of Publica on : Half-yearly (April and October)Publisher's Name : Oakbrook Business SchoolPlace of Publica on : Adalaj, Gandhinagar, India

Managing Editor : P Bala Bhaskaran

Contact Address : Oakbrook Business School, Plot No. 225, Opp. Maharaj Hotel Lane, Jamiyatpura Road, Sarkhej-Gandhinagar Highway, Po. Jamiyatpura, Gandhinagar - 382423, INDIA.E-mail : [email protected] : www.oakbrook.ac.inPhone : 079-23970170/1

39Vol. 2 | No. 1 | April, 2016


BHAVNAGAR VRUDHASHRAM TRUST

C GopalkrishnanProfessor Emeritus, Pandit Deendayal Petroleum University, Gandhinagar

Economic development brought in industrialization and urbanization. With these, came in migration of young people within and outside the country for

1employment. The joint family system that has been prevalent in India for ages has been disrupted badly leaving the social infrastructure into ruins. This has begun to leave large number senior citizens, both men and women, with little or no family support in their old ages. There are also many senior citizens who did not have off-springs of their own; they are left with no hope

2of support at old age. It is here that Bhavnagar Vrudhashram (Home for the Aged) stepped in to give succor to the senior citizens in their day to day life, without any restriction of caste, creed or sex. Over the next half a century Bhavnagar Vrudhashram Trust emerged as an old-age-home that could accommodate 245 persons housed in two buildings.

Birth of the organizationBhavnagar Vruddhashram was started by Shri Mannbhai Bhatt, the main architect of social services in the town of Bhavnagar. Shri Mannbhai Bhatt, a very active social worker, was one of the founder members of a charitable organization called, The ShishuVihar Ttrust, established for the betterment of children. In early 1969 looking at the changing scenario of the Indian joint family system Shri Manbhai Bhatt thought of doing something for the betterment of the aged persons, who were deprived of their kith and kin. Initially he had thought of building a small facility on the campus of ShishuVihar; after discussion with the trustees of

thShishu Vihar, on 12 December 1969 a final decision was taken to create a separate facility and a separate organization named Bhavnagar Vrudhashram Trust.

There was already an old age home operating from Akwada area in Bhavnagar. However the old-age home was not maintained well and the residents were also not fully satisfied. Shri Mannbhai Bhatt and his associates decided to give better services to the old people in the Akwada ashram and also build additional capacity for serving the other old and needy people. With this objective the Trustees approached the Government, for allocation of land for the ashram and for donation from people. With the resources mobilized thus, they started building more rooms and started shifting the inmates from Akwada Ashram. Slowly and gradually as the donations came in, the Trust kept on increasing the number of rooms to accommodate 150 persons in the ashram and developed more facilities for the inmates. The Ashram admitted persons aged more than 60 years. A noble lady called Shrimati Gulabben Hariben Ghoghawala [through Shri Chinubhai Ghoghawala] donated a significant amount for the building of the old-age home; based on this donation the building was named after her. The Bhavnagar Vruddhashram Trust

thwas registered as Public Charitable trust on 19 December 1970.

The founder of the Bhavnagar Vruddhashram, Shri Mannbhai Bhatt was a prominent social worker in and around Bhavnagar. He was a freedom fighter from year 1921 onwards. In 1938 he was the moving force in

40 Vol. 2 | No. 1 | April, 2016

Board of Trustees in 2012 1. Shri Prataprai

Tarachandbhia Shah President

2. Shri Santoshbhai Gunvantrai Kamdar

Joint Secretary

3. Shri Devendrabhai Rasikbhai Shah

Joint Secretary

4. Shri Acgytbhai J Mehta Treasurer 5. Shri Harshadrai Balkrushan

Sheth Trustee

6. Shri Pravinbhai C Mehta Trustee 7. Shri Arunbhai A Mehta Trustee

Old Vrudhashram

Persons New Vrudhashram

Persons

Gents cabin 44 Ground floor 6 Ladies cabin 29 Ladies room 30 Room for Couples

24 Room for Couples

26

Gents room 22 Gents room 32 Ladies room 32 Total 151 Total 94

Old Ashram

Charges pm

New Ashram

Charges pm

Cabin Rs. 250 Room Rs. 500 Room Rs. 1500


building Navjeevan Balmandir, a school exclusively focusing the underprivileged and backward class students. He had also built Bajrang Health Club in Bhavnagar. Other prominent persons who contributed to the establishment of the oldage home were Shri Venilal Maganlal Parekh, Shri Harshadbhai Sheth, Shri Gulabrai H Sanghvi and Shri Ramniklal M Shah. Shri Venilal Parekh was president of Bhavnagar Nagrik Sahkari Bank and was associated with number of NGOs. Shri Harshadbhai Sheth was a prominent social worker while Shri Gulabrai Sanghvi was an advocate of Bhavnagar. Shri Ramniklal Shah was a prominent businessman with active interest in social work.

Capacity and Occupancy

The ashram charges very nominal fee for the stay and 3food at the ashram . The charges for food and stay are as

below:

Facilities and Entertainment GardenThe ashram has a good garden on it's the premises. It is a place where old people come to rest and share moments of joy with each other. The old people walk and relax in the garden.

TempleThe ashram has a temple inside the premises. Each building has a separate temple. The new building has Lord Krishna as the presiding diety and the old building has Lord Shiva. In both the temples people do morning and evening prayers together. Also each residential room has a loud speaker in the room for those who cannot come to the prayer hall or temple. Sitting in their rooms, they can listen to the prayers.

TV areaThe ashram has two TV watching areas on each floor so that the people of the ashram can watch the TV programmes. There are some special occasions like a cricket match when all the people watch the TV together.

PicnicThe ashram has made it a practice to organize two picnics in a year. One picnic is of two to three days duration while other is for a single day. The ashram authorities do not charge any extra money from the people for picnic.

GarbaStudents of various schools are invited to perform art and cultural activities on the ashram premises. There is

4special attention on Garba programme during the Navratri festival where the old people of the ashram also join in the garba dance.

Other AmenitiesBesides all the above facilities and advantages the residents of the ashram can also bring their own electrical appliances like A.C., Fridge, Gas stove, T.V. etc which they can install in their rooms. The Ashram does

41Vol. 2 | No. 1 | April, 2016


not levy extra charges for the electricity or the fitting charges.

Thus, after considering all the above benefits and advantages, one of the inmates commented the ashram as “The Swarg” (The Heaven on earth) for them.

Other FacilitiesHospital The ashram has four different types of clinics inside the new building premises serving the residents of the ashram as well as outsiders.

Ÿ AyurvedicŸ AllopathicŸ HomeopathyŸ Acupressure

A Case fee of Rs. 1 is taken as a token amount from the residents of the ashram and Rs. 5 from the outsiders but all the medicines are provided free of cost by the ashram to residents as well as outsiders. This is just to help the society by utilizing the funds of various donors. Periodical medical check-up of the inmates and diagnostic camps are arranged. Rotary Club, Lions Club, N.S.S., blood banks, State Bank of India, and local charitable hospitals are always at hand to provide the much needed help in this humanitarian work. There is also a small minor operation theatre inside the premises. Yoga lessons and health lectures by experts are arranged time to time.

Tiffin ServiceThe ashram provides Tiffin service to the old people residing in the city of Bhavnagar. Currently the ashram serves around 222 households out of which 19 households get Tiffin service free of cost for lifetime as they are economically not capable of paying the token Tiffin charges. The Tiffin charges are Rs 30 per day for two times meal. The Tiffin service men will deliver the Tiffin and also take back the empty containers twice a day. There is no need even for washing the same as that is taken care of by ashram itself. The Tiffin delivery men are also senior citizens. Menu for lunch is roti (the Indian

bread), sabzi (vegetables), daal (Lentil Soup), rice, kathol (pulses) and salad and menu for dinner include khhichdi (rice cooked with lentils and vegetabls), kadhi (a yogurt based curry), sabzi (vegetables), and bhakhari (a millet based Indian bread). The Tiffins gets delivered at 11 in the morning and at 6:30 in the evening. LibraryThe ashram has a well maintained library having around 7000 books and 50 periodicals. The library can be accessed by outsiders also by paying a mere Rs 5 as a token fee for the whole year and the ashram people can access the library for Rs 3 only as a token fee for life time.

EntertainmentProgrammes of light and instrumental music, old film songs, magic shows, folk songs, Dayaras, Raas Garba etc are arranged regularly. Various entertainment groups of Bhavnagar, Social organizations, and service clubs arrange such events. Some music lover inmates celebrate their birthdays by themselves arranging such programmes. The inmates are even taken out to see some good movies in the theatres and other cultural programmes from time to time.

Magazine – BaghbaanThe Ashram publishes a magazine named Baghbaan every three months which includes various readings regarding activities carried out by the ashram during the period, various stories, poems, and articles related to the lives of old people.

FinanceThe trust runs completely on the grants from the government and donations from individual donors. Construction of the new building was supported significantly by donors. Some of the prominent donors were:

42 Vol. 2 | No. 1 | April, 2016


The trust has a long history and it was in receipt of financial support from its donors for each and every project from time to time. The above listing is only a sample and no reflection of the total list of donors and donations received by the trust over time.

The state government has been providing a grant of Rs. 9,00,000 every year for the maintenance and operations of the Old Vruddhashram. However the new Vruddhashram with modern amenities does not come under the purview of government grants. The costs of running the new set up are met by the trust and by using the donations from individuals throughout the year. Donations are accepted in cash as also by way of goods and services. Whenever there are festivals or occasions like birthdays or any other celebrations, private donors donate either a fixed amount or undertake to pay for the food expenses of the inmates. The Ashram has been making modest income from the Tiffin services. The source of funds include grant from government, donations, and interest on accumulated donations over the years; these have been more than adequate to cover the costs of both the Vruddhashrams completely.

OPERATIONS - Procurement of food itemsDaily requirement of milk has been 35 liters; this is procured daily. Vegetables are also procured on a daily basis. Ghee, oil, pulses and similar other provisions are procured on a monthly basis. Menu is planned carefully to have variety and change every day. The menu is same for the inmates of both the Vruddhashrams and the receivers of Tiffin service. This ensures variety as also

economies of scale.

All non-perishable items, after procurement, are packed in one-kg packs and stored. This facilitates monitoring consumption of each item closely. Lately a computer has been introduced for recording purposes and stock checking. While ordering 10 % extra quantity is procured to meet any contingency. While procuring good quality standards are a major consideration to ensure hygiene and cleanliness.

Criteria for selection:Admission to the ashram is open to all irrespective of religion, caste, or income. Only persons older than 60 years are admitted. A team from the Ashram visits the applicant to check whether the person is really in need of the facilities of the Ashram. Applicants are kept in a waiting list based on the date of their application; they are admitted, on first come first basis, as the vacancy arises. In the last few years the demand has always been more than the supply of vacancy at the ashram. The reasons why inmates have vacated in the past were found to be:

1. Family Problems

2. Death

3. Extremely bad health

Selection procedure for availing Tiffin serviceOn receiving an application for tiffin service, a team of 2 members visit the applicant to verify whether the applicant [i] is a senior citizen, [ii] is physically challenged, [iii] has sources of income and [iv] has any family problems. Based on these, prioritization of beneficiaries is done. The geographic span of the Tiffin service is limited to Bhavnagar city only.

Achievements and awardsThis is the only Vrudhashram in and around Bhavnagar city. It has won the prestigious Rashtrapati award from the President of India, Dr. Radhakrishnan for best Vrudhashram of the country.

Prominent Donors Name Resident of Amount in

Rs Shri Satishbhai N Bhayani & Smt Pariben

U.S.A. 51,22489

Smt Manharben Dayalal Masharani & Shri Ansukhbhai Dayalal Masharani

U.K. 13,50,000

Bhavnagar Nagrik Sahkari Bank Ltd

Bhavnagar 11,00,000

43Vol. 2 | No. 1 | April, 2016


Reasons for coming to the ashramThe reasons why many senior citizens land up in the Ashram have been analyzed and found to be:

Ÿ No Children (5%)

Ÿ Physically Incapable (12%)

Ÿ Family Problems (3%)

Ÿ To spend rest of the life happily and comfortably (73%)

Ÿ Other (7%)

Banking Inmates are not allowed to keep valuable items and cash in access of Rs. 2000 in the room. For that there is a small bank within the campus of the ashram. Cash more than 2000 lies with the bank and whenever any of the inmates need money they can get it.

Human RecourseThe Staff are highly motivated. They are recruited only if their objectives and values are aligned with those of the Ashram. The Staff is expected to show extreme care and affection to the inmates in all their dealings so that inmates do not feel that they are away from their homes. One of the inmates commented that “the ashram is having the best and dedicated team of trusties and staff which differentiate this ashram from others”.

In 2012, Bhavnagar Vrudhashram Trust had 7 trustees, and 65 full time and part-time resident employees' working day/night shifts. Total number of full time employees was 56 ( Kitchen staff: 29; Tiffin delivery men: 10; Office staff: 6; Cleaning staff: 7; Security persons:4).

5Every Diwali the employees are given a festival bonus which amounted to almost a months salary. They are recruited by giving advertisements in the newspapers as well as through references.

ChallengesSome of the inmates are very well qualified and reasonably healthy to take up some form of work. On occasions their desire was indicated to the trustees. However, some of the trustees had reservations about

allowing people to work outside the Ashram. Their argument went like thus:

Ÿ The purpose of the ashram is to provide shelter to old people so that they can spend the rest of their lives peacefully away from the problems of their daily lives.

Ÿ If the person can earn a living then it does not go well with the purpose of the ashram. Instead of admitting a person capable of earning independently, actually the needy can be given shelter in the ashram.

A battery of counter arguments to this line of thinking could be accumulated.

Ÿ The old-age home is essential for the elderly persons who lack a home of their own; who lack relatives or companions of their own; who need security of a home and for many other reasons.

Ÿ Do these reasons make them incapable of doing physical or intellectual work at their pace? Should not that choice be left to the individual to make? Should not an old-age home create the freedom and space for the individual to make his choices and engage himself in his or her own creat ive occupations?

Ÿ Many experts think that continuing to work would keep a person healthy physically and mentally. In fact keeping a healthy person idle over a long time would only help decrease his health.

Ÿ Allowing a senior citizen to go out for work may not be desirable because it involves the risk of travel in addition to the risk of working.

An alternative option would be to design activities within the Ashram that will need physical and mental work, part of which could be sourced from within the Ashram. If Tiffin service can be done from within the Ashram why not a printing press or a coaching class or a crèche that engages some of the inmates? Such initiatives

44 Vol. 2 | No. 1 | April, 2016


would on one side engage some of the inmates; on another side would generate revenues to the Ashram. Though the trust is structured as a non-profit

organization, is there any harm it engages in activities that would move it towards sustainability?


45Vol. 2 | No. 1 | April, 2016


FAST - FASHION GALLERY - ZARA VS H&M

Harleen SahniNational Institute of Fashion Technology, Gandhinagar

Kishor BaradShanti Business School, Ahmedabad

IntroductionFashion Industry is highly competitive in nature. Business of fashion demands continuous promotion of new trends in order to remain competitive and sell more. Changing trends necessitate companies' to remain contemporary in rapidly changing market scenarios. Fast-Fashion is one such sector of Fashion Industry that reflects the current trends of the industry and has the responsibility of creating new Fashion which is more speedy and innovative in comparison to the offerings of competitors. Modern-day consumers are impatient and impulsive and at the same time surrounded by proliferated buying options. Delayed response to market requirements means lost customers and thus, lost profit. The cases brings forth the prominent innovative approaches adopted by Zara and H&M, two leading players in the field of Fast-Fashion and compare their market-centric practices to be at the fore-front of Fashion business.

Introduction to Fast Fashion'Fast-Fashion' is affordable clothing which is a result of catwalk designs moving into stores in the fastest possible way to respond to market trends. The essential building blocks of successful Fast-Fashion brands are-

Ÿ Customer - Centricity, to understand target market’s actual demands and provide an invigorating “Total Experience” through p r o d u c t , s e r v i c e , r e t a i l - i n t e r f a c e , communications etc.

Ÿ Innovative approaches in design, development and delivery of products (e. g. quick - response, cost - efficiency, technology - integration etc).

Zara and H&M both are significant components and contributors of the global apparel chain. This buyer-driven global chain, in which profits derived from “unique combinations of high-value research, design, sales, marketing, and financial services that allow retailers, brand marketers and brand manufacturers to

AbstractThe case is a comparative study of business processes and strategies of two multinational companies engaged in the business of ready to wear garments. This case will be useful to many companies engaged in similar businesses in general and students of global marketing in particular. The prominent reason for writing this case was to study and compare various factors, processes, systems and strategies used by leading multinational corporations in doing business globally.

Keywords: Fast-Fashion, Customer-centricity, Innovation, Total Experience

46 Vol. 2 | No. 1 | April, 2016


act as strategic brokers in linking overseas factories” with markets. The case provides an insight into the major points of comparison between the two fast-fashion retailers on the below given criteria:-

Ÿ Product Portfolio

Ÿ Technological Innovation

Ÿ Product & Production Strategies

Ÿ Marketing Practices

Ÿ Retail Interface

Ÿ Supply Chain Capabilities

ZARA - Fresh FashionIntroductionZara, world’s largest fashion retailer, has managed to establish an enviable position in market by earning higher profit-margins. It is the flagship brand of Inditex SA (a Spanish retail group).Zara's concept of 'Freshly-baked clothes' encourages consumers to treat clothes as perishable commodity. Inditex has shown a trajectory of rapid, profitable growth over the years. For most of the retail establishments the winning formula is “Buy less and Sell more – Buy on credit and sell in cash”, but the weird mantra of Zara success is “shorter lead time equals to more fashionable clothes and lower quantities means scare supply, more demand meaning more style and more choice”.

The practice of shorter lead times enables the company to match pace with changing fashion trends. Shorter response time ensures that company stores clothing styles and colors that are in demand by consumers at that time. From the phase of identifying most popular fashion trends to having clothes in its stores, Zara takes just 30 days time. Most retailers of comparable sizes work on timelines that stretch from 4-12 months. Catching fashion when it is hot is a clear recipe for better margins with more sales and lesser discounts. Zara matches pace with changing consumer demand and preferences. A dedicated design team in Spain is busy throughout the year to identify the prevalent fashion trends and designing styles to match these trends. Fashion goods are highly perishable and are susceptible to season; gross margin is meaningless if the product does not sell as planned. Zara feels that fashion will be more appetizing to customers if it is fresh. To keep its products fresh, it constantly researches for new fashion trends. Secondly the company creates an artificial scarcity in each style by manufacturing lesser quantity of it. Zara feels that when the merchandise is available in lesser quantities, it becomes more desirable.

ZARA's JourneyThe important milestones in Zara's journey of success are highlighted below.

Table 11963-1974

A. O. Gaona, chairman and founder of Inditex, begins his career as a clothing manufacturer. Steady growth in business with increasing number of factories.

1998 New stores opened in new markets: United Kingdom, Turkey, Argentina, Venezuela, United Arab Emirates, Japan, Kuwait and Lebanon.

1975 Zara traces its roots to this year’s opening of the first Zara store on a street in downtown A Coruña, Spain.

1999 Inditex acquires Stradivarius, the Group's fifth retailer. Stores open in Netherlands, Germany, Poland, Saudi Arabia, Bahrain, Canada, Brazil, Chile and Uruguay.

1976-1984

Zara’s approach to fashion is well received by the public, which prompts the retailer to extend its network of stores to major Spanish cities.

2000-2001

Inditex begins trading on the stock market. Group ventures into Ireland, Iceland, Italy, Luxembourg, the Czech Republic, Puerto Rico, Denmark, Qatar and Jordan.

1985 Inditex is founded as the holding company of the group of businesses operating at the time.

2002-2004

Zara starts its new distribution hub in Zaragoza, Spain. Outlets open in Finland, Switzerland, El Salvador, and Singapore. The Group unveils store number 2,000 (in Hong Kong), expanding to 56 countries in Europe.

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1986-1987

Group’s manufacturers give their entire output to Zara and lay the foundations for a distribution system that can meet the needs of its expected rapid growth.

2007 Zara Home introduces Inditex’s first on-line store. Two new Spanish distribution hubs begin operating. Zara shop number 1000 launched in Florence (Italy). Group enters Croatia, Colombia, Guatemala, and Oman.

1988 Zara opens its first store outside Spain in December 1988 in Oporto, Portugal

2008 Launch of Uterqüe, a retailer specializing in accessories and other fashion extras. Inditex reaches the 4,000-store milestone with an opening in Tokyo.

1989-1991

The Group gets shoppers in the United States and France with stores in New York and Paris. Inditex buys 65% of the Massimo Dutti Group.

2009 Inditex signs a joint venture with the Tata Group to open stores in India beginning in 2010. A new distribution centre begins operating in Palafolls (Barcelona), next to the existing logistics platform in Tordera.

1992-1994

Inditex continues to grow in new international markets: Mexico, Greece, Belgium and Sweden.

2010 Inditex opened its first stores in Bulgaria, India and Kazakhstan, bringing its presence to 77 countries. Reached the 5,000-store mark with launch of eco-efficient Zara store in Rome.

1995-1997

Inditex acquire 100% Massimo Dutti. The Group launches its first shop in Malta and Cyprus. Stores expand to Norway and Israel.

2011-2012

Group captured 5 continents with stores in Taiwan, Azerbaijan, Australia, South Africa, Peru. Zara shows its revamped image based on four guiding principles: beauty, clarity, functionality and sustainability.

Product PortfolioZara offers products in three major categories - womenswear, menswear and childrenwear with the given sub-categories:

Wom

ensw

ear

Men

swea

r

Kid

swea

rCoats & BlazersDressesShirtsTrousersJeansSkirtsKnitwearShoesHandbagsAccessories (Caps, Gloves, Hair-Bands, Belts etc.)Spec ia l / Discount products category (on company website)

Coats & JacketsBlazersSuitsTrousersShirts & T-shirtsSweatshirtsKnitwearBasicShoesAccessoriesBagsSoftwear

BabiesBoysGirls

Business GrowthAs per Inditex's Annual Report of 2012, Zara enjoyed strong growth in the year 2012. This is also reflected in an increase of 16% in the Group's turnover, up to €15,946 million. Company attributes this huge increase to its continued ability to adapt to different sales formats and meet the demand of its customers. The company has grown by deveoping new retail areas, with 482 net openings. Since 2012, Zara has been able to open new stores in 64 different markets globally. Potential is also

seen in Zara's online sales. Zara is desigining its new stores, and even re-furbishing existing stores on eco-concepts according to its Strategic Environment Plan. By the end of 2012, Inditex had 6,009 stores in its eight sales formats in 86 markets in five continents. In the same period, 482 stores were opened in 64 different markets, five of them were newly opened in Armenia, Bosnia-Herzegovina, Ecuador, Georgia and the Former Yugoslav Republic of Macedonia. In 2012 the new Zara global store concept was presented. This was the first part of group to open its chain on 666 fifth Avenue, New

48 Vol. 2 | No. 1 | April, 2016


York, which thus became its world flagship store. The new image is based on four principles of beauty, clarity, functionality and sustainability. The company has enjoyed a continuous growth in sales over the past few years resulting in incresaing net profit year by year.

In 2012, Zara started online sales in Poland, with this Zara operates in 17 European countries through this channel, in addition to the United States and Japan. Recently Zara presented its new concept of global store on 666 Fifth Avenue, New York. This establishment is located in the Tishman Building reflecting chain's new commercial image. Zara started its internet sales operation in China, a new step in the gradual extension of e-commerce to all the markets in which it operates.

Technological InnovationsZara has been at the fore-front of developing advanced manufacturing logistics system with the help of IT tools, JIT concept, advanced telecommunication systems and vertical integration. Zara has highly automated factories specialized by garment type, and focused on the capital-intensive parts of the production processes like pattern design, cutting, final finishing and inspection. For promoting quick response (QR), a set of policies and practices targeted at improving coordination between retailing and manufacturing in order to increase the speed and flexibility of responses to market shifts. QR required changes that spanned functional, geographic, and organizational boundaries but could help retailers reduce forecast errors and inventory risks by planning assortments closer to the selling season, probing the market, placing smaller initial orders and reordering more frequently, and so on. QR had led to significant compression of cycle times, enabled by improvements in information technology and encouraged by shorter

fashion cycles and deeper markdowns, particularly in women's wear.

Production StrategiesTo keep the process under strict monitoring, ZARA manufactures its most-sensitive products internally. About 11,000 distinct items are produced almost every year as compared to 2000-4,000 items by key competitors. Several hundred thousand SKUs vary in color, fabric, and sizes. Production takes place in small batches, with vertical integration into the manufacture of the most time-sensitive items. Each of Zara's three product lines mainly for women, men, and children has a creative team consisting of designers, sourcing specialists, and product development personnel. The creative team continuously tracks customer preferences and focuses on careful interpretation of catwalk trends suitable for the mass market. The Quick Response technique, short cycle time, reduced working capital intensity and facilitated continuous manufacture of new merchandise enables Zara to commit to the bulk of its product line for a season much later than its key competitors.

On average, several dozen items are designed each day, but only slightly more than one-third of them actually go into production. Very limited volumes of new items are stitched and presented in certain key stores and later on produced on a larger scale if consumer reactions are unambiguously positive. As a result, failure rate on new products is only 1%, compared with an average of 10% for the sector. Learning by doing was considered very important in achieving such favorable outcomes. Zara creates two basic collections each year that are phased in through the fall/winter and spring/summer seasons, starting in July and January respectively. As the collection comes together, the sourcing personnel identify production requirements, decide whether an item would be in-sourced or outsourced, and set a timeline to ensure that the initial collection arrives in stores at the start of the selling season.

Most of the fabric purchased is “gray” (un-dyed) to

Particulars 2012 2011 2010 2009 2008 Sales (Mill Euros) 15,946 13,793 12,527 11,048 10,407 Net Profit (Mill.Euros) 2,367 1,946 1,741 1,322 1,262 No.of Stores 6,009 5,527 -- -- -- No.of markets with Commercial Presence

86 82 -- -- --

No. of markets with an online store

22 20 -- -- --

Table 2: Figures of Sales, Pro & Number of Stores

49Vol. 2 | No. 1 | April, 2016


facilitate in-season updating with maximum flexibility, using the concept of postponement. Much of the fabric is obtained through Comditel, a 100%-owned subsidiary of Inditex, which deals with more than 200 external suppliers of fabric and other raw materials. It takes only a week to finish the fabric. Based on internal core competencies and capabilities of external partners, finished garments are manufactured internally, some are sourced from Europe and North Africa and Asia. Even for the garments that are manufactured in-house, cut garments are sent out to about 450 workshops for the labor-intensive job of sewing. The sewn garments are sent back from the workshops to Zara's manufacturing complex, where they are inspected, ironed, folded, bagged, and ticketed before being dispatched to the adjoining distribution center.

Marketing PracticesZara collects customer insights through intensive market study, conversations with store managers and analysis of sales data. Other sources of information include industry publications, TV, Internet, and film content; trend spotters who focus on venues such as university campuses and discotheques; and even Zara's young, fashion-conscious staff.

Zara spends only 0.3% of its revenue on media advertising, compared to 3% to 4% by most of the specialty retailers. Its advertising is generally limited to the start of the sales period at the end of the season. Zara does not exhibit its merchandise at the ready-to-wear fashion shows, but its new items are first displayed in its stores. Zara attracts customers by its power of “fresh” offerings, creating scarcity, an attractive ambience around them, and positive word of mouth. New designs arrive twice a week. Pricing is market-based. Zara simplified its price tags to list only the prices in the local markets in which a particular garment is sold, even though it complicates logistics. The higher prices outside Spain implied somewhat different positioning for Zara' sin overseas markets, particularly in emerging markets. Differences in positioning also affect the stores in which products are sold and Zara's overall image, for e.g. Zara

enjoyed a high-end image in South American market.

Retail InterfaceZara offers fresh assortments of designer style garments and accessories like shoes, bags, scarves, jewelry and, more recently, toiletries and cosmetics for relatively low prices in sophisticated stores in prime locations in order to draw masses of fashion conscious repeat customer. About three-quarters of the merchandise on display are changed every three to four weeks. This inspires an average Zara shopper to visit the store approximately 17 times a year, compared with an average 3 to 4 times a year for competing chains and their customers. Zara stores are mostly located in prime locations and look very attractive from inside as well as outside. Storefronts have amazing presentations. Zara relies on significant centralization of store window displays and interior presentations by using the stores to promote its market image. Zara has a captivating website which offers online shopping facility.

Supply Chain CapabilitiesBoth internal and external production flow's into Zara's central distribution center. Products are shipped directly from the central distribution center to well-located, attractive stores twice a week, eliminating the need for warehouses and keeping inventories low. Emphasis is on using backward vertical integration to be a very quick fashion follower than to achieve manufacturing efficiencies by building up significant forward order books for the upstream operations. The company's inventories are strictly controlled for the limited production runs, even if customer demands are unsatisfied.

Vertical integration reduces “bullwhip effect” and enables Zara to originate a design and have finished goods in stores within four to five weeks in the case of entirely new designs, and two weeks for modifications (or restocking) of existing products. Zara's distribution center in Arteixo, has a mobile tracking system that docked hanging garments in the appropriate bar-coded area on carousels capable of handling 45,000 folded

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garments per hour.

Orders are received from hand-held computers in the stores. For approved orders, the central warehouse issue list to organized deliveries. Shipments from the warehouse are made twice a week to each store via third-party delivery services. Shipments are done two days a week to one part of the store network and another two days a week to the other parts. Zara owns much of its production and most of its stores, as compared to H&M which has narrower vertical scope. This strategy enables Zara to reduce the “Bull-whip effect”.

Hennes & MauritzIntroduction:Hennes & Mauritz (H&M) is a Swedish multinational fast-fashion clothing company. It is ranked as second largest global clothing retailer, after ZARA. It was founded in 1947 and was known as Hennes, meaning “hers” in Swedish. The company in its initial years of

inception sold only the women clothing. The first store of the company was opened in Sweden. The company was renamed as “Hennes & Mauritz” in 1968.Than after it has diversified its product portfolio to include men wear, children wear, footwear, accessories, cosmetics, home furnishings, in addition to women wear. Today the company has more than 2600 stores across the globe. H&M styles are designed in collaboration with renowned fashion designers. This enables the brand to stay at the forefront of fashion. The design team in the company's Sweden office controls the stages of production, right from the merchandise planning to establishing specification. The production is outsourced to approximately 800 factories in Europe and Asia. These facilities are used for horizontal division of labour, rather than being integrated.

The H&M JourneyThe important milestones in H & M's business journey of success are highlighted below.

Table 3

1947 The first store opens in Västerås, Sweden, selling women’s clothing. The store is called Hennes.

2004 H&M ini ates collabora ons with top designers like Karl Lagerfeld, Stella McCartney, Viktor Roberto Cavalli, Jimmy Choo, Sonia Rykiel , Versace, David

1952 Hennes opens in Stockholm. 2006 Major expansion of online and catalogue sales begins. The first stores in the Middle East open via franchise.

1964 The first store outside Sweden opens in Norway. 2007 First Asian stores open in Hong Kong & Shanghai. The new concept store COS , Monki is launched. Expansion of online & catalogue sales con nues.

1968 Sales of men’s and children’s clothing begin. The name is changed to Hennes & Mauritz.

2008 H&M opens its first Japanese store in Tokyo and acquires fashion firm FaBric Scandinavien AB.

1974 H&M is listed on the Stockholm Stock Exchange. 2009 First H&M stores opens in Russia & Beijing. Lebanon becomes a new franchise market. H&M Home is launched.

1976 The first store outside Scandinavia opens in London, in the UK.

2010 First H&M stores opens in South Korea & Turkey. Israel becomes a new franchise market. Online shopping starts in UK. H&M becomes the world’s largest consumer of organic co on.

1977 Impulse stores, focused on t eenagers, are launched. Sales of cosme cs begin.

2011 H&M opens in Romania & Singapore, and franchise in Morocco and Jordan. H&M Incen ve Program includes a reward program for employees and Monki launch online shopping in 18 markets.

1980s Stores open in Germany and the Netherlands. H&M acquires the mail order company Rowells

2012 H&M opens in Bulgaria, Malaysia and Mexico, and via franchise in Thailand.

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Business GrowthH&M is currently present in 48 markets and has continued to be successful despite of varied consumer climate in the different fashion markets that it operates in. H&M has continued to gain market share through strong customer offering of fashion and quality at the best price. The sales of H & M increased by 11 percent in 2012 and was strong in countries such as the US, Canada, China and Russia. In emerging markets like Malaysia, Thailand and Mexico the company registered good sales. The group visualizes scope for expansion in other brands too that include COS, Monki, Weekday and Cheap Monday.

H&M only offers online shopping to customers in 8 of its 48 markets around the world namely Sweden, Norway, Denmark, Finland, Germany, the Netherlands, Austria, and the U.K. H & M launched its first online store in U.S. in August 2013. The gross margin for the Group for the financial year amounted to 59.5 percent. The growth of H & M is attributed to its strategy of always offering the best in each individual market. In 2012 company opened 304 stores, which are more than the originally planned 275 stores. During the year most of the stores were opened in China and the US. The company too expanded stores in Russia, Italy, Poland, France, Spain and UK. The online market is increasingly growing, with particularly strong growth in mobile shopping via smart phones and tablets. In January 2013, the Group launched a completely mobile-adapted H&M shop online in H&M's existing eight online markets in order to accommodate this rapid development. The profit after tax of the company increased by 7% in the same financial year.

1990s Progress in Europe. First store opened in France. Outdoor adver sing in addi on to Newspaper & magazine adver sing. Online shopping begins.

2013 The first H&M store in Chile. H&M also opens in Estonia, Lithuania and Serbia. Indonesia becomes a new franchise market. H&M introduces online shopping in the US. A global clothing collec ng ini a ve starts in selected stores.

2000 The first US store opens on Fi h Avenue in New York. Stores open in Spain. H&M opens in more European markets.

Wom

ensw

ear

Men

swea

r

Kids

wea

r

Hom

e - F

urni

shin

gJackets & CoatsBlazers & WaistcoatsOffice WearSports WearLingerieSocks & TightsNight WearSwim WearAccessories (Scarves, Mi ens, Caps, Bags, Belts, etc.)ShoesCosme csMaternity WearPlus Sizes

Jackets & CoatsT-Shirts & ShirtsHoodies & SweatshirtsCardigansSuitsPantsJeansShortsSport WearSwim WearUnder Wear & SocksAccessoriesShoes

BabiesBoysGirls

Living RoomBedroomKitchenBathroomOutdoorBaby Room

Figure 2: H&M Product Por olio

Particulars 2012 2011 2010 2009 2008 Sales (Mill. Euros)

15,896 14,527 14,319 13,387 11,734

Net Profit (Mill.Euros)

2,513 1,784 2,106 1,847 1,724

No. of Stores 2,776 2,437 -- -- -- No. of markets with Commercial Presence

48 40 -- -- --

Table 4: Figures of Sales, Profit and Number of Stores

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Technological Innovations IT is a crucial tool along the entire value chain. Individual stores are connected with the logistics and procurement departments and the central warehouse. From central departments, it is possible to follow sales of individual items, thus feeding an intell igent procurement system. The company relies on IT integration between the central office and the product ion offices . Communicat ion between departments takes place electronically, including design and product development.

Production StrategiesH&M products are synonymous with affordability and up-to- date high quality fashion. H&M's business concept is to offer fashion and quality at the best price. The products range is divided into different concepts for men, women and children. H&M offers wide product categories starting from designer styles, to tailoring the most wearable basics. The clothing collections are designed by company's designer team. The designer collaboration strategy has brought global recognition to H & M. The company's clothing collections are created inSweden by hundreds of designers. H&M's method of production is customer driven. The company puts lot of efforts into research and prediction of emerging trends, both through traditional research means and innovative ones such as street trends. H&M operates with two main collections per year, one in spring and another in autumn. Within each season, there are a number of sub-collections so that customers can always find new goods in stores.

The production function consists of 21 production offices. Production offices deal with sample garments and other checking and testing work that helps the company to reduce lead time. H&M is on the fore-front of sustainability drive. The company has a deep sense of responsibility towards people in the society and the natural environment. It focuses on seven ambitious commitments towards business sustainability namely- 1. Provide fashion for conscious customers

2. Choose & reward responsible partners 3. Be ethical 4. Be climate smart 5. Reduce, reuse and recycle 6. Use natural resources responsibly 7. Strengthen communities

H&M doesn't own any factory. The company has developed long term network with around 800 suppliers. Products are mainly sourced from Europe and Asia. One of the major objectives of the company is to improve the working condition of workers in the supplier's countries and reduce environmental impacts. Production offices located in sourcing markets are the main point of contact between the local suppliers which enables the company to coordinate timing and other practical aspects of all orders. Production offices perform extensive safety and quality testing work. Lead times vary from a few weeks to six months. High-volume products such as basics and children's wear are ordered far in advanced while trend-led garments are ordered in small quantities at shorter notices.

Marketing PracticesThe name Hennes & Mauritz was rebranded to H&M to simplify worldwide perception of the brand. H&M's 'Responsibility Marketing' concept conveys a positive image. The objective is to make sure that the brand stays in spotlight. The company's marketing department owns a global advertising agency, where in multi-channel campaigns are created and other marketing materials developed. The advertisements produced are largely identical for all markets, but media strategy is adapted to local requirements and conditions. The company also runs cause-related marketing campaigns such as “Fashion Against Aids”. In addition advertising material also includes bags and packaging.

Retail InterfaceEvery H&M store is unique. The stores have visually-inspiring in-store and window displays which reflect and maintain the brand image of the company. The collections are extensive and new items come in store

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every day.

Supply Chain CapabilitiesH&M's business strategy consists of expanding through developing a proprietary distribution network of centrally controlled stores; price competitiveness, profitability through efficient management of production and logistics and short lead times to quickly respond to market trends. Supply chain capabilities are backed by up-to-date information about sales and consumers.

As H&M does not have any factories of its own, it relies on a network of external suppliers managed through two departments namely “Buying” and “Production”. The buying function focuses on customers, fashion and composition of the range. H&M purchases garments from around 750 suppliers out of which 60% of production takes place in Asia and the remaining in Europe. Buyers' orders are placed with the right supplier; goods are produced at the right price and quality and the suppliers have to confirm to the company's code of conduct for working conditions. Buyer selection is done in congruence with the objective of flexibility, short-lead times, cost-efficiency and factors related to transport times, import quotas and quality aspects. The company has managed to reduce average lead time by about 15-20% through increasing efficiencies in its buying processes.

Every stage in the logistic chain is controlled by H&M. It acts as importer, wholesaler, as well as a retailer. The continuous development of IT technologies provides support to H&M logistics. The stock management is primarily handled by H&M where as transportation is contracted to third parties.

ConclusionZara popularizes the concept of “Freshly Baked Fashion” or “Fresh Fashion” by providing latest fashion to consumers at affordable prices. H&M highlights its business philosophy as “Fashion and Quality at the best price”.

H&M is the closest competitor of Zara. H & M had been very prompt in internationalizing its business (almost 10 years earlier than Zara), to generate more than half of its sales outside its home country. However it is lagging behind because of its narrow vertical scope as Zara owns much of its production and most of its stores. H&M had adopted a more focused approach of entering one country at a time and building a distribution centre in each country. Most of H&M production is outsourced.

Both the retailers have an integrated supply chain supported by IT tools for sharing critical information between channel partners. Efficient control of the distribution network allows these retailers to have direct control of market and customers and enjoy cost efficiency and shortened lead times.

Unlike Zara, H&M operated a single format, although it marketed its clothes under numerous labels or concepts to different customer segments. H&M tend to have slightly lower prices than Zara (which H&M display prominently in store windows and on shelves) and use extensive advertising like most other apparel retailers. But H&M employ fewer designers (60% lesser than Zara), and refurbished its stores less frequently. However H&M's Designer Collaboration has been an important success factors for the company. The company has also acquired a distinct position in the fashion world by actively participating in the “Sustainability Drive” and incorporating the goals of social benefit and environment restitution in business practices. Zara, on the other hand has recently become active in the arena of environmental stewardship by making its new stores eco-friendly and also refurbishing its existing stores to make them environment-friendly.

Both Zara & H&M offer extensive sub-categories in each of the major apparel categories of women wear, men wear and children wear, but in addition H&M has forayed into the line of home furnishing as well to provide complete solutions for self, family and home to its shoppers. From the case study, it becomes evident that certain key building blocks for business success in global environment is cross-function integration, use of

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TIMELESS LEADERSHIP:18 LEADERSHIP SUTRAS FROM THE BHAGVAT GITA

Author: Debasis ChatterjeePublisher: Wiley India Private Limited, New Delhi

Reviewed by: Dhriti Bhattacharya

'Timeless Leadership: 18 Leadership Sutras from The Bhagavad Gita' explores into the mind and context of the modern day business leader and sees how the key philosophies or sutras of the Bhagavad Gita can help the leader. Debashis Chatterjee's latest offering identifies 18 major teachings from the Holy book of the Hindus and gives them a contemporary context. He has drawn a parallel between Arjun and the modern day business leader, both of whom are battling wars every day. And most of the time, the battle is in the mind. So lessons from the Gita range from embracing discontinuity and death to decoding the meaning of life to ultimately uniting the two wills.

The book has been divided into 18 chapters, each one dedicated to one sutra, each sutra being defined as a “cognitive unit or a chapter title that compresses the message of the whole chapter.” The first chapter begins with the Warriors Journey that explains the psychological context of Gita. As we know, Gita begins with Arjuna's mental turmoil and dilemma when he realizes that he must fight his own family and friends to win the war. The author puts the business leader in the same place and says that most CEOs are constantly in this state of dilemma between what is wrong and right. And what a true leader should do in such a situation is to deal with the mind first. All human beings like to stay in a comfort zone. But when one is forced to come out of the comfort zone then only transformation happens.

The second sutra is invincible wisdom which means that leaders create alternative reality. The author says that leadership is all about creating alternative reality and leaders always bring a refreshing perspective that reframes current

reality. Krishna asks Arjun to avoid being stuck in pain or pleasure, victory or defeat. This mental state is called mental equipoise. When one attains this state, then one is not affected by circumstances of pain or pleasure or victory or defeat. It is in this chapter, that the author also talks about unselfish work where one works without clamouring for its fruits. There are multiple implications of this concept. One of them is that the leader should work without worrying for results because the results are not separate from the action. If the action is right and timely, then the result will follow. Also, one should be detached from the results.

The third sutra is that of Karma Yoga that talks about how leaders enter the timeless cycle of action. The author says that the word “karmayoga” doesn't have a English equivalent. So he comes up with the word workship which literally means “work as workship.” In Gita, Krishna says that the attitude of treating work like workship makes our action more perfect and takes us to a state of higher consciousness. In the context of leadership, the focus of the leader's action becomes a function of the consciousness from a function of external recognition such as pay and promotion.

The fourth sutra is “Timeless Leaders Pursue Purpose as the Source of Supreme Power.” In this sutra, Krishna says that the leader should be a Rajarshi or a sage-king. One part of the raja is the king who represents power and the other part is that of sage who stands for wisdom. The combination in the form of Rajarshi is the principle in which power is used for the evolution of humankind. The author says that when power is not accompanied by wisdom, then organizations misuse their power and over time collapse and cease to

Book Review

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exist. Leaders must free their organizations from useless formalities and selfish interests and from the conflict of individual identities and organizational ego.

The fifth sutra is “Leadership is the Art of Undoing.” In this the author talks about Krishna's teaching that one should be completely engaged in whatever they are doing but should detach themselves from the illusion that it is they who are doing. Extrapolating this to the leadership context, the author says that timeless leaders are awareness-centric and not egocentric.

The sixth sutra is art and practice of meditation. A timeless leader has stillness of mind which essentially means that their minds are steady, controlled and focused. Only if one's mind is not swayed by anxiety and nervousness, can one focus on their goals and succeed.

The seventh sutra is the freedom of “I Am.” This chapter deals with the fact that a good leader holds diverse people and processes like the thread of a necklace that holds many pearls together. A true leader needs to realize that liberation is a shared experience. In any organization, unless the lowest in the hierarchy can be whatever they want to be, the highest in the hierarchy cannot be whatever he or she wants to be. Human condition is thus interdependent on each other.

The eighth sutra is about decoding the meaning of life. In this chapter, Krishna discusses the meaning of life in the context of our work. Krishna says that work becomes a chore for us when it does not have a meaning for us. But if one asks the question: what is the meaning of this work for me then the business of business and the business of life will become one. In the business world, a timeless leader will see patterns and relationships in events and activities and with an open mind, he or she will be able to make sense of the changes in the organization.

The ninth sutra is that timeless leaders live in a self-organizing universe. The real value of a leader is tested when he or she is not there in the organization. The value of the leader can be experienced when the organization walks on the path showed by him/her even in absentia.

The tenth sutra is that leadership is an adventure of consciousness. A timeless leader brings the whole consciousness of who he is to what he does. His mind does not wander when he is doing some work. The pursuit of excellence is a timeless journey and a lifelong quest. In business, the leaders should not only focus on his own journey towards excellence but also motivate their protégé to do the same.

The eleventh sutra is that timeless leaders have integral vision. They can see and recognize patterns even from inadequate or insufficient data. And because they can see it, their thoughts and actions become synchronized in a manner that serves the larger purpose of life. Timeless leadership does not come from control of material resources but from serving the very human source that creates those resources.

The twelth sutra is that love is the leader's essence; love is the leader's presence. The lesson from Gita that is discussed here is the work that is a product of one's love. Timeless leaders don't look for love in the approval or disapproval of people but they look for love within. And in this context, love is the wholeness that a leader experiences when he is able to subdue his senses, restrain the mind's need to acquire and steady his intellect in the awareness of the divine presence within and around himself.

The thirteenth sutra is that leaders command their field with the eye of wisdom. In Gita, Krishna describes field as the entire network of material and mental forces that create our beliefs, guide our behavior and determine the business of our life – in short all that can be known and observed constitutes the field of all fields. And the ultimate fulfillment of a timeless leader is to be the knower of his field. Krishna also lists down twelve qualities of a leader who has integrated his heart with his head. These qualities are: humility, non-injury, unpretentiousness, forgiveness, uprightness, service to one's teacher, purity, steadfastness, self-regulation, absence of egoism, even-mindedness and seeking periodic solitude and silence. These qualities give the leader those eyes that can see without mental distortions and biases.

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The fourteenth sutra is that leaders harness the dynamic forces of nature. Nature has three qualities that bind and embody the indestructible soul in us. They are inertia, dynamism and illumination. Inertia is the seed form of physical or psychological action. Dynamism is the movement from non-action to action. It is the stage of growth and evolution. Illumination, the third process, represents the evolution of consciousness. It is not so much growth in the physical realm as it is growth in the psychological realm. True leaders should aim for illumination even though he wants to gain knowledge and wisdom.

The fifteenth sutra is that timeless leaders discover their invisible source. The most significant role of a leader is to make the invisible clearly visible. For example, inspiration is not visible but inspired action is visible. The leader knows that human life is like a river, the source and the endpoint, both are invisible. And so when leaders integrate themselves with their being they can experience their wholeness and their timeless, infinite spirit.

The sixteenth sutra is that leaders negotiate the crossroads between the divine and the devilish. Krishna advocates self-restraint and compassion for others as virtues of the divine and cites self-indulgence and callousness as vices of the devilish. They are two states of the consciousness. What Krishna defines as the divine is nothing but the journey to the core of light and illumination and the devilish is the movement away from this source of light to the realms of darkness. The leader has to negotiate between these two and journey toward compassion, peace and core of our being.

The seventeenth sutra is that leaders follow their faith. Krishna says that faith is the deep structure of not just our spiritual quests but also our worldly passions and our blind prejudices. He says there are three kinds of faith based on three types of human nature: slothful, dynamic and illumined. These three kinds of faith play out in the lives of the leaders in their work, speech, food and gifts. Faith defines the critical decisions in a leader's life because his heart is where his faith is.

The eighteenth and the last sutra is that leadership is transcendence. Krishna shows how the threefold path of leadership- knowledge, action and devotion – become one in

the pursuit of perfection. Transcendence is the ultimate goal of such a quest. Transcendence is the merging of personal will with the impersonal will of the cosmic order. A true leader gives his followers a choice and does not bind them with compulsion. The unenlightened leader binds the follower with insecurity, expectation and dependence.

The book very successfully talks about leadership traits and how many well-established companies in the modern age crumbled down because of bad leadership. When the ego and petty desires of the leader takes over the larger good of the society and the cosmic order, organizations collapse. On the other hand, when one looks closely at the leadership qualities of people who are heading growing organizations, one realizes that the values upheld by the Gita are being practiced by their leaders. All throughout the book, Krishna represented the timeless leader and Arjuna represented the protégé who has to be motivated to become a leader. The book does not address the typical questions about goals and objectives of an organization and aligning oneself to it like the many self-help books available. Instead, it delves into the basic philosophy of our existence and role of the leader in taking people on the path of illumination.

This book makes an interesting read for both leaders and aspiring leaders. What makes it interesting is that it weaves in relevant stories in between and quotes from Rumi, Khalil Gibran and Sri Ramkrishna, among others. He also quotes examples and quotes from Western leaders and academicians. This adds to the universal appeal of the teachings of the Bhagavad Gita. It also drives home the point that though rooted in Indian philosophy, the teachings of the Gita are universal and applicable in modern contexts as well.

Gita has attracted a lot of attention from academicians and thought leaders in the recent past. A lot of books have been written by scholars who have interpreted the Gita from various viewpoints. So while this book may look like one more interpretation it offers a lot of insight into what makes a leader great in the truest sense. The book is definitely not for a light read as it requires a lot of thinking and introspection. Also, the philosophical tone of the book will ensure that only the truly interested reader will pick it up from the bookstore.

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TRANSCENDENCE:MY SPIRITUAL EXPERIENCES WITH PRAMUKH SWAMI

Author: A P J Abdul Kalam with Arun TiwariPublisher: HarperCollins Publishers, 2015

Reviewed by: Dr. Abhay Raja

Jerusalem, sacred place for Judaism, Christianity and Islam and one of the oldest cities of the world, is destroyed twice, besieged twenty-three times, attacked fifty-two times and captured and recaptured forty-four times. Do we conclude that peace and violence are two sides of the same coin? Or do we conclude that religion and peace are the two extremes of a continuum? Religion has to travel the path of spiritual peace and tranquility. Dr. Kalam states in Transcendence, “The only p e a c e t h a t w i l l f u l ly s a t i s f y u s i s p e a c e o f t h e Divine.”Transcendence, the book, is a resonance of spiritual experiences with realization of inner peace, bliss and harmony. The book explores a harmonious blend of science and spirituality: science of Dr. Kalam and spirituality of Pramukh Swamiji.

Fusion of the ExtremesDr. Kalam shares nostalgia of his childhood at Rameshwaram. He has been witness to three contrasting personalities meeting frequently at his home: a Vedic scholar, a head priest and an imam of the mosque. The last one was his father. Three would sit in courtyard for hours and explore solutions for problems of the community over a cup of tea. This has been the Indian tradition for millennia, a healthy propensity for integrating diverse ideas and reaching consensus.

Our inheritance from the past may be coloured by grief, anger, rivalry, intolerance, agony, happiness, peace, brotherhood, tolerance or harmony. Transcendence is about fusing the extremes towards meaningful and manageable blends of experiences. The book narrates the most brutal and disastrous episodes of our civilization from recent past, right from Gandhiji's expulsion from the first class compartment of a train in South Africa to terrorist attack on Akshardham, Gandhinagar. Then it describes the ultimate spirituality of

Pramukh Swamiji, as an answer to all those scuffles of thoughts.

The good, The evil and The beyondThe flash of “the good” and “the bad” thoughts keeps jostling in the brain as ongoing series of conflicts in the human mind. As the book unfolds, the answer of the conflict pops up from its pages in the form of strong conviction of spirituality. Fredrick Nietzsche rightly quoted in Beyond Good and Evil, “What is done out of love always takes place beyond good and evil”. Dr Kalam portrays Pramukh Swamiji as an apt personification to this dictum.

Akshardham, Gandhinagar is the most splendid, priceless and wonderful creation of Pramukh Swamiji and the team. What could have been the trigger for the terrorist-attack on this wonderful place? When it was reopened, in just twelve days after terrorist-attack, Pramukh Swamiji had ensured that no trace of the calamity was visible, anywhere. He had offered prayers for victims and sprinkled holy water and flowers where the two terrorists had died. This was his counter to the brutality, cruelty and violence. Virtues of tolerance, patience and forgiveness can never be eradicated from human civilization. To give and to forgive are the best milestones on the path of happiness and peace. Gandhiji pertinently believed, “An eye for an eye will make the whole world blind”.

Pramukh Swamiji – the ultimate teacherAmong the galaxy of teachers, Dr. Kalam places his father first; Jainulabdeen who lived a simple life inculcated a belief in him that divinity is inside all humans and that it can lift us from all negatives. From Dr. Brahma Prakash he learned to be tolerant of others' views and opinions for building team and accomplish the unachievable. From professor Satish Dhavan


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he learned to remove impurities by living pure and ethical life for serving humanity and let God shine through human being. From Jain Muni Acharya Mahapragya he learned that consciousness is the birthplace of human ethics. He came in contact with Bochasanwasi Shri Akshar Purushottam Sanstha (BAPS) in March 2001 after Gujarat earthquake in relief camps where Sadhu Brahmviharidas shook Dr. Kalam's spiritual self with a question: what came to your mind when you detonated India 's first atomic bomb? I t was through Sadhu Brhmaviharidas that Dr Kalam came to know the great unifier and teacher, Pramukh Swamiji.

BAPS, of which Pramukh Swamiji is the President, has a string of more than eleven hundred temples of Lord Swaminarayan spread over five continents. It is through these temples that BAPS disseminates its humanitarian activities transcending cultural, social and spiritual wisdom. Dr. Kalam exemplifies Pramukh Swamij as bridge of love and compassion. Pramukh Swamiji was asked, “How can you mix spirituality and social service?” His response was, “How can you separate the two?” On another occasion he said, “The wise discipline themselves; the unwise discipline others.” Dr. Kalam adores the divine teacher in Pramukh Swamiji so much that he believed that thinking of him was like being with him.

Dr. Kalam – the presidential disciple Dr. Kalam had met Pramukh Swamiji only about ten times. Despite his multi-faceted learning and vast experience Dr Kalam was overawed by the divine personality of Swamiji. He had the humility to admit that when faced with intricate problems, he always chose to surrender to the divinity of Swamiji; he could realize a resolution to his predicament, not from words but from his spiritual presence.Dr Kalam describes his experience of 'profound communication of consciousness' when Pramukh Swamiji held his hand for ten minutes and no

thwords were exchanged. This was on their last meeting on 11 March 2014. Narrations of Dr Kalam's meetings with Pramukh Swamiji are experiential lessons in spiritual upbringing and would leave the reader spell-bound.

Dr. Kalam and Pramukh SwamijiDr. Kalam's learning from Pramukh Swamiji amounted to spiritual experience. He argues: schools can educate the mind, but who can educate the spirit; hospitals can mend a broken bone; but who can mend broken hope; entertainment can excite the senses, but where can one get peace of mind; some diseases

cannot be seen, they can only be experienced. Dr Kalam quotes Tolstoy [What Men Live By and Other Tales], “One may live without father or mother, but one cannot live without God.”Some of the primary triggers for the present day violence are distrust and unhappiness; most of these can be wiped off if we remove “I” and “Me” from prominence in human mind. Dr Kalam compares Pramukh Swamiji to Himalayas in terms of humanitarian activities and to Pacific Ocean in terms of peace.

Pearls from TranscendenceŸ Knowledge purposefully applied indeed becomes a

divine forceŸ No nation is great or good because its people are

great and goodŸ Simple life is the master key to freedom, self-

realization and self-knowledgeŸ The most valuable possession you can own is an

open heartŸ Let us teach our followers that religion does not

grow by quantity of numbers, but by the quality of spirituality

Transcendence – a journey withinThe book, 'Transcendence' is a scrupulous articulation of experiences of a great scientist and human being - Dr. Kalam as disciple and Pramukh Swamiji as the Spiritual Master. There are four stages in this journey of exploration: Search in the right place, Remove the dust, Open your inner eye and See your destiny waiting for your effort to be realized.

The book is not only the experiences with the spiritual master. The narration in the book is more about Dr. Kalam's spiritual dilemma within and perhaps less about his experiences with Swamiji. Pramukh Swamiji became his guide as Nimit. At several places in the book it looked like that efforts are made to correlate Pramukh Swamiji's teachings with his experiences. However, Transcendence merits high on the grounds of good use of history, right connect with societal tribulations and prominence of spirituality. The book is a torch bearer to the spiritual journey of fellow human beings.

Pramukh Swamiji, in one of his meetings with Dr Kalam had said, “Ancient rishis had long hair, were great scientists, were not married and worked hard with great values. You are a shining example of simple living and high thinking!”


61Vol. 2 | No. 1 | April, 2016

OAKBROOK BUSINESS REVIEWJournal of the New Generation Management Thinkers

OAKBROOK BUSINESS REVIEW (OBR) is a journal of the Oakbrook Business School (OBS), dedicated to the emerging trends in management. OBS is a new genera on B-School that believes in academic excellence. Its endeavor is to nurture excellence and leadership in academia and through this ini a ve. It intends to bring about a paradigm shi in the quality of leadership in all sectors of businesses around it. OBS has major focus on research and publica ons; it has also embarked on entrepreneurship and incuba on for the student community and the SME segment around its ecosystem. In January 2015, OBS has entered into an MOU with Wollongong University, Sydney, Australia for academic collabora on.

OBR is created with the vision of emerging as the cradle of management thinkers and thought leaders. Its mission is to help nurture management thinking and research among the management professionals and academicians. It has spelt out the objec ves of the journal as

Ÿ To offer a pla orm for research publica ons of the emerging management intellectualsŸ To help and nurture research talent among management teachers and professionals

OBR has cons tuted an editorial board consis ng of dis nguished academicians to steer the direc ons of the journal. The journal will focus on various aspects of the management domain. The journal would have about 4 papers (Conceptual, Empirical or Research) 2 case-studies and 2 book reviews. Each of the papers and case-studies would be subjected to two reviews to ensure quality of the journal. The maximum permissible length of a paper is 5000 words excluding an abstract of maximum 200 words. OBR is commi ed to communicate the editorial decision whether to publish or not in a me span of 4 weeks from the date of receipt of the manuscript. To facilitate this deadline, OBR would monitor the review process very closely.

As OBR is commi ed to nurture research talent among management teachers and professionals, special care is planned to be taken to mentor and guide the new authors/researchers to enable them to achieve certain threshold standards of quality.

Researchers/Authors are invited to send in their contribu ons to the editorial office through mail. OBR is also keen to enlarge its panel of reviewers; persons interested in being empanelled as reviewers may also send in their review with focus on publica on track-record to the editorial office.

[email protected]


62 Vol. 2 | No. 1 | April, 2016

OAKBROOK BUSINESS SCHOOLPlot No. 225, Opp. Maharaj Hotel Lane,

Jamiyatpura Road, Sarkhej-Gandhinagar Highway,PO. Jamiyatpura, Gandhinagar - 382423.

oakbrook - business review

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